Correlation Between Sun Hung and NATIONAL HEALTHCARE

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

Diversification Opportunities for Sun Hung and NATIONAL HEALTHCARE

0.57

Correlation Coefficient

Sun Hung  NATIONAL HEALTHCARE

Very weak diversification

The 3 months correlation between Sun and NATIONAL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and NATIONAL HEALTHCARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL HEALTHCARE 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 NATIONAL HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL HEALTHCARE has no effect on the direction of Sun Hung i.e., Sun Hung and NATIONAL HEALTHCARE go up and down completely randomly.

Pair Corralation between Sun Hung and NATIONAL HEALTHCARE

Assuming the 90 days horizon Sun Hung Kai is expected to generate 1.99 times more return on investment than NATIONAL HEALTHCARE. However, Sun Hung is 1.99 times more volatile than NATIONAL HEALTHCARE. It trades about 0.11 of its potential returns per unit of risk. NATIONAL HEALTHCARE is currently generating about -0.07 per unit of risk. If you would invest  710.00  in Sun Hung Kai on October 10, 2024 and sell it today you would earn a total of  185.00  from holding Sun Hung Kai or generate 26.06% return on investment over 90 days.

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

Sun Hung Kai  vs.  NATIONAL HEALTHCARE

Sun Hung Kai

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sun Hung reported solid returns over the last few months and may actually be approaching a breakup point.

NATIONAL HEALTHCARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL HEALTHCARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sun Hung and NATIONAL HEALTHCARE

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

The idea behind Sun Hung Kai and NATIONAL HEALTHCARE 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.