Correlation Between New World and Hang Lung

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

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

Diversification Opportunities for New World and Hang Lung

0.39

Correlation Coefficient

New World  Hang Lung

Weak diversification

The 3 months correlation between New and Hang is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Hang Lung Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Properties and New World 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 New World Development are associated (or correlated) with Hang Lung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Lung Properties has no effect on the direction of New World i.e., New World and Hang Lung go up and down completely randomly.

Pair Corralation between New World and Hang Lung

Assuming the 90 days horizon New World is expected to generate 2.71 times less return on investment than Hang Lung. In addition to that, New World is 5.84 times more volatile than Hang Lung Properties. It trades about 0.0 of its total potential returns per unit of risk. Hang Lung Properties is currently generating about 0.07 per unit of volatility. If you would invest  396.00  in Hang Lung Properties on December 27, 2024 and sell it today you would earn a total of  26.00  from holding Hang Lung Properties or generate 6.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

New World Development  vs.  Hang Lung Properties

New World Development

Risk-Adjusted Performance

Very Weak

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

Hang Lung Properties

Risk-Adjusted Performance

Modest

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

Pair Trading with New World and Hang Lung

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

The idea behind New World Development and Hang Lung Properties 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.