Correlation Between Hang Lung and SM Prime

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

Diversification Opportunities for Hang Lung and SM Prime

0.0

Correlation Coefficient

Hang Lung  SM Prime

Pay attention - limited upside

The 3 months correlation between Hang and SPHXF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Group and SM Prime Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Prime Holdings 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 SM Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Prime Holdings has no effect on the direction of Hang Lung i.e., Hang Lung and SM Prime go up and down completely randomly.

Pair Corralation between Hang Lung and SM Prime

Assuming the 90 days horizon Hang Lung is expected to generate 3.85 times less return on investment than SM Prime. But when comparing it to its historical volatility, Hang Lung Group is 3.62 times less risky than SM Prime. It trades about 0.05 of its potential returns per unit of risk. SM Prime Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  25.00  in SM Prime Holdings on October 25, 2024 and sell it today you would earn a total of  21.00  from holding SM Prime Holdings or generate 84.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.1%
Values	Daily Returns

Hang Lung Group  vs.  SM Prime Holdings

Hang Lung Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Lung Group are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

SM Prime Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Prime Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SM Prime is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hang Lung and SM Prime

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

The idea behind Hang Lung Group and SM Prime Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.