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 Group, 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

0.01

Correlation Coefficient

New World  Hang Lung

Significant diversification

The 3 months correlation between New and Hang is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Hang Lung Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Group 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 Group 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 Development is expected to under-perform the Hang Lung. In addition to that, New World is 1.89 times more volatile than Hang Lung Group. It trades about -0.02 of its total potential returns per unit of risk. Hang Lung Group is currently generating about 0.05 per unit of volatility. If you would invest  630.00  in Hang Lung Group on October 10, 2024 and sell it today you would earn a total of  14.00  from holding Hang Lung Group or generate 2.22% return on investment over 90 days.

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

New World Development  vs.  Hang Lung Group

New World Development

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hang Lung Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hang Lung Group 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 fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..