Correlation Between Sun Hung and Hongkong Land

Can any of the company-specific risk be diversified away by investing in both Sun Hung and Hongkong Land 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 Sun Hung and Hongkong Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Hung Kai and Hongkong Land Holdings, you can compare the effects of market volatilities on Sun Hung and Hongkong Land 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 Sun Hung with a short position of Hongkong Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Hung and Hongkong Land.

Diversification Opportunities for Sun Hung and Hongkong Land

0.29

Correlation Coefficient

Sun Hung  Hongkong Land

Modest diversification

The 3 months correlation between Sun and Hongkong is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Hongkong Land Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongkong Land Holdings and Sun Hung 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 Sun Hung Kai are associated (or correlated) with Hongkong Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongkong Land Holdings has no effect on the direction of Sun Hung i.e., Sun Hung and Hongkong Land go up and down completely randomly.

Pair Corralation between Sun Hung and Hongkong Land

Assuming the 90 days horizon Sun Hung Kai is expected to under-perform the Hongkong Land. But the stock apears to be less risky and, when comparing its historical volatility, Sun Hung Kai is 1.01 times less risky than Hongkong Land. The stock trades about -0.02 of its potential returns per unit of risk. The Hongkong Land Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  411.00  in Hongkong Land Holdings on December 28, 2024 and sell it today you would lose (7.00) from holding Hongkong Land Holdings or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Sun Hung Kai  vs.  Hongkong Land Holdings

Sun Hung Kai

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Hung Kai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sun Hung is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hongkong Land Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hongkong Land Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hongkong Land is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sun Hung and Hongkong Land

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

The idea behind Sun Hung Kai and Hongkong Land Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.