Correlation Between Hang Seng and CCSB Financial

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

By analyzing existing cross correlation between Hang Seng Bank and CCSB Financial Corp, you can compare the effects of market volatilities on Hang Seng and CCSB Financial 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 Seng with a short position of CCSB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Seng and CCSB Financial.

Diversification Opportunities for Hang Seng and CCSB Financial

0.35

Correlation Coefficient

Hang Seng  CCSB Financial

Weak diversification

The 3 months correlation between Hang and CCSB is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and CCSB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCSB Financial Corp and Hang Seng 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 Seng Bank are associated (or correlated) with CCSB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCSB Financial Corp has no effect on the direction of Hang Seng i.e., Hang Seng and CCSB Financial go up and down completely randomly.

Pair Corralation between Hang Seng and CCSB Financial

Assuming the 90 days horizon Hang Seng Bank is expected to generate 0.79 times more return on investment than CCSB Financial. However, Hang Seng Bank is 1.27 times less risky than CCSB Financial. It trades about -0.05 of its potential returns per unit of risk. CCSB Financial Corp is currently generating about -0.18 per unit of risk. If you would invest  1,206  in Hang Seng Bank on September 21, 2024 and sell it today you would lose (33.00) from holding Hang Seng Bank or give up 2.74% of portfolio value over 90 days.

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

Hang Seng Bank  vs.  CCSB Financial Corp

Hang Seng Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

CCSB Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCSB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hang Seng and CCSB Financial

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

The idea behind Hang Seng Bank and CCSB Financial Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.