Correlation Between Hong Kong and Sino Land

Can any of the company-specific risk be diversified away by investing in both Hong Kong and Sino Land at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hong Kong and Sino Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Kong Land and Sino Land Co, you can compare the effects of market volatilities on Hong Kong and Sino Land and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hong Kong with a short position of Sino Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Sino Land.

Diversification Opportunities for Hong Kong and Sino Land

0.32

Correlation Coefficient

Hong Kong  Sino Land

Weak diversification

The 3 months correlation between Hong and Sino is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Sino Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Land and Hong Kong is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hong Kong Land are associated (or correlated) with Sino Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Land has no effect on the direction of Hong Kong i.e., Hong Kong and Sino Land go up and down completely randomly.

Pair Corralation between Hong Kong and Sino Land

Assuming the 90 days horizon Hong Kong Land is expected to generate 0.79 times more return on investment than Sino Land. However, Hong Kong Land is 1.26 times less risky than Sino Land. It trades about 0.03 of its potential returns per unit of risk. Sino Land Co is currently generating about -0.01 per unit of risk. If you would invest  2,276  in Hong Kong Land on November 29, 2024 and sell it today you would earn a total of  57.00  from holding Hong Kong Land or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Hong Kong Land  vs.  Sino Land Co

Hong Kong Land

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Hong Kong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sino Land

Risk-Adjusted Performance

Insignificant

Over the last 90 days Sino Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sino Land is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hong Kong and Sino Land

The main advantage of trading using opposite Hong Kong and Sino Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Sino Land can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sino Land will offset losses from the drop in Sino Land's long position.

The idea behind Hong Kong Land and Sino Land Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.