Correlation Between Swire Pacific and Hang Lung

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

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

Diversification Opportunities for Swire Pacific and Hang Lung

0.82

Correlation Coefficient

Swire Pacific  Hang Lung

Very poor diversification

The 3 months correlation between Swire and Hang is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific and Hang Lung Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Properties and Swire Pacific 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 Swire Pacific are associated (or correlated) with Hang Lung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Lung Properties has no effect on the direction of Swire Pacific i.e., Swire Pacific and Hang Lung go up and down completely randomly.

Pair Corralation between Swire Pacific and Hang Lung

Assuming the 90 days horizon Swire Pacific is expected to generate 9.77 times less return on investment than Hang Lung. But when comparing it to its historical volatility, Swire Pacific is 2.28 times less risky than Hang Lung. It trades about 0.02 of its potential returns per unit of risk. Hang Lung Properties is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Hang Lung Properties on September 2, 2024 and sell it today you would earn a total of  64.00  from holding Hang Lung Properties or generate 18.03% return on investment over 90 days.

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

Swire Pacific  vs.  Hang Lung Properties

Swire Pacific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Swire Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hang Lung Properties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Lung Properties are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Hang Lung showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swire Pacific and Hang Lung

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

The idea behind Swire Pacific and Hang Lung Properties 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.