Correlation Between Sun Hung and Longfor Group

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

Diversification Opportunities for Sun Hung and Longfor Group

-0.24

Correlation Coefficient

Sun Hung  Longfor Group

Very good diversification

The 3 months correlation between Sun and Longfor is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group 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 Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of Sun Hung i.e., Sun Hung and Longfor Group go up and down completely randomly.

Pair Corralation between Sun Hung and Longfor Group

Assuming the 90 days horizon Sun Hung Kai is expected to generate 0.37 times more return on investment than Longfor Group. However, Sun Hung Kai is 2.72 times less risky than Longfor Group. It trades about 0.12 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about -0.08 per unit of risk. If you would invest  959.00  in Sun Hung Kai on December 28, 2024 and sell it today you would earn a total of  127.00  from holding Sun Hung Kai or generate 13.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

Sun Hung Kai  vs.  Longfor Group Holdings

Sun Hung Kai

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Sun Hung reported solid returns over the last few months and may actually be approaching a breakup point.

Longfor Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sun Hung and Longfor Group

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

The idea behind Sun Hung Kai and Longfor Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.