Correlation Between Security Federal and Hang Seng

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

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

Diversification Opportunities for Security Federal and Hang Seng

-0.25

Correlation Coefficient

Security Federal  Hang Seng

Very good diversification

The 3 months correlation between Security and Hang is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Security Federal and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank and Security Federal 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 Security Federal are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Security Federal i.e., Security Federal and Hang Seng go up and down completely randomly.

Pair Corralation between Security Federal and Hang Seng

Given the investment horizon of 90 days Security Federal is expected to generate 1.54 times more return on investment than Hang Seng. However, Security Federal is 1.54 times more volatile than Hang Seng Bank. It trades about 0.02 of its potential returns per unit of risk. Hang Seng Bank is currently generating about -0.02 per unit of risk. If you would invest  2,645  in Security Federal on October 8, 2024 and sell it today you would earn a total of  114.00  from holding Security Federal or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.98%
Values	Daily Returns

Security Federal  vs.  Hang Seng Bank

Security Federal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Security Federal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Security Federal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Security Federal and Hang Seng

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

The idea behind Security Federal and Hang Seng Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.