Correlation Between Hang Lung and Mitsubishi Estate

Can any of the company-specific risk be diversified away by investing in both Hang Lung and Mitsubishi Estate 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 Mitsubishi Estate 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 Mitsubishi Estate Co, you can compare the effects of market volatilities on Hang Lung and Mitsubishi Estate 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 Mitsubishi Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Lung and Mitsubishi Estate.

Diversification Opportunities for Hang Lung and Mitsubishi Estate

0.17

Correlation Coefficient

Hang Lung  Mitsubishi Estate

Average diversification

The 3 months correlation between Hang and Mitsubishi is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Group and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate 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 Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of Hang Lung i.e., Hang Lung and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between Hang Lung and Mitsubishi Estate

Assuming the 90 days horizon Hang Lung is expected to generate 3.78 times less return on investment than Mitsubishi Estate. In addition to that, Hang Lung is 1.76 times more volatile than Mitsubishi Estate Co. It trades about 0.03 of its total potential returns per unit of risk. Mitsubishi Estate Co is currently generating about 0.2 per unit of volatility. If you would invest  1,374  in Mitsubishi Estate Co on December 21, 2024 and sell it today you would earn a total of  231.00  from holding Mitsubishi Estate Co or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hang Lung Group  vs.  Mitsubishi Estate Co

Hang Lung Group

Risk-Adjusted Performance

Weak

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

Mitsubishi Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Estate Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Mitsubishi Estate showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hang Lung and Mitsubishi Estate

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

The idea behind Hang Lung Group and Mitsubishi Estate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.