Correlation Between Hang Seng and Permanent TSB

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

Diversification Opportunities for Hang Seng and Permanent TSB

0.2

Correlation Coefficient

Hang Seng  Permanent TSB

Modest diversification

The 3 months correlation between Hang and Permanent is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and Permanent TSB Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permanent TSB Group 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 Permanent TSB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permanent TSB Group has no effect on the direction of Hang Seng i.e., Hang Seng and Permanent TSB go up and down completely randomly.

Pair Corralation between Hang Seng and Permanent TSB

Assuming the 90 days horizon Hang Seng Bank is expected to generate 0.66 times more return on investment than Permanent TSB. However, Hang Seng Bank is 1.51 times less risky than Permanent TSB. It trades about 0.0 of its potential returns per unit of risk. Permanent TSB Group is currently generating about -0.07 per unit of risk. If you would invest  1,215  in Hang Seng Bank on October 25, 2024 and sell it today you would lose (6.00) from holding Hang Seng Bank or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Hang Seng Bank  vs.  Permanent TSB Group

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.

Permanent TSB Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permanent TSB Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hang Seng and Permanent TSB

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

The idea behind Hang Seng Bank and Permanent TSB Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.