Correlation Between Hang Lung and Lai Sun

Can any of the company-specific risk be diversified away by investing in both Hang Lung and Lai Sun 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 Hang Lung and Lai Sun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hang Lung Group and Lai Sun Development, you can compare the effects of market volatilities on Hang Lung and Lai Sun 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 Hang Lung with a short position of Lai Sun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Lung and Lai Sun.

Diversification Opportunities for Hang Lung and Lai Sun

-0.06

Correlation Coefficient

Hang Lung  Lai Sun

Good diversification

The 3 months correlation between Hang and Lai is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Group and Lai Sun Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lai Sun Development and Hang Lung 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 Hang Lung Group are associated (or correlated) with Lai Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lai Sun Development has no effect on the direction of Hang Lung i.e., Hang Lung and Lai Sun go up and down completely randomly.

Pair Corralation between Hang Lung and Lai Sun

Assuming the 90 days horizon Hang Lung Group is expected to generate 0.37 times more return on investment than Lai Sun. However, Hang Lung Group is 2.71 times less risky than Lai Sun. It trades about 0.07 of its potential returns per unit of risk. Lai Sun Development is currently generating about -0.13 per unit of risk. If you would invest  630.00  in Hang Lung Group on December 19, 2024 and sell it today you would earn a total of  60.00  from holding Hang Lung Group or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Hang Lung Group  vs.  Lai Sun Development

Hang Lung Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Lung Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hang Lung may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lai Sun Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lai Sun Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hang Lung and Lai Sun

The main advantage of trading using opposite Hang Lung and Lai Sun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hang Lung position performs unexpectedly, Lai Sun 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 Lai Sun will offset losses from the drop in Lai Sun's long position.

The idea behind Hang Lung Group and Lai Sun Development 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.