Correlation Between Sun Hung and Vonovia SE

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

Diversification Opportunities for Sun Hung and Vonovia SE

-0.45

Correlation Coefficient

Sun Hung  Vonovia SE

Very good diversification

The 3 months correlation between Sun and Vonovia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Vonovia SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE ADR 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 Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE ADR has no effect on the direction of Sun Hung i.e., Sun Hung and Vonovia SE go up and down completely randomly.

Pair Corralation between Sun Hung and Vonovia SE

Assuming the 90 days horizon Sun Hung Kai is expected to generate 0.69 times more return on investment than Vonovia SE. However, Sun Hung Kai is 1.44 times less risky than Vonovia SE. It trades about 0.01 of its potential returns per unit of risk. Vonovia SE ADR is currently generating about -0.11 per unit of risk. If you would invest  957.00  in Sun Hung Kai on December 28, 2024 and sell it today you would earn a total of  3.00  from holding Sun Hung Kai or generate 0.31% return on investment over 90 days.

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

Sun Hung Kai  vs.  Vonovia SE ADR

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. In spite of fairly strong forward-looking indicators, Sun Hung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vonovia SE ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vonovia SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sun Hung and Vonovia SE

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

The idea behind Sun Hung Kai and Vonovia SE ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.