Correlation Between New World and Hysan Development

Can any of the company-specific risk be diversified away by investing in both New World and Hysan Development 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 Hysan Development 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 Hysan Development Co, you can compare the effects of market volatilities on New World and Hysan Development 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 Hysan Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Hysan Development.

Diversification Opportunities for New World and Hysan Development

0.42

Correlation Coefficient

New World  Hysan Development

Very weak diversification

The 3 months correlation between New and Hysan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Hysan Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hysan Development 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 Hysan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hysan Development has no effect on the direction of New World i.e., New World and Hysan Development go up and down completely randomly.

Pair Corralation between New World and Hysan Development

Assuming the 90 days horizon New World Development is expected to generate 2.88 times more return on investment than Hysan Development. However, New World is 2.88 times more volatile than Hysan Development Co. It trades about 0.05 of its potential returns per unit of risk. Hysan Development Co is currently generating about 0.06 per unit of risk. If you would invest  35.00  in New World Development on December 28, 2024 and sell it today you would earn a total of  1.00  from holding New World Development or generate 2.86% return on investment over 90 days.

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

New World Development  vs.  Hysan Development Co

New World Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Hysan Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hysan Development Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hysan Development may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with New World and Hysan Development

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

The idea behind New World Development and Hysan Development Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.