Correlation Between Wharf Holdings and Sun Hung

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

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

Diversification Opportunities for Wharf Holdings and Sun Hung

0.51

Correlation Coefficient

Wharf Holdings  Sun Hung

Very weak diversification

The 3 months correlation between Wharf and Sun is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wharf Holdings and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai and Wharf Holdings 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 Wharf Holdings are associated (or correlated) with Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of Wharf Holdings i.e., Wharf Holdings and Sun Hung go up and down completely randomly.

Pair Corralation between Wharf Holdings and Sun Hung

Assuming the 90 days horizon Wharf Holdings is expected to generate 1.63 times less return on investment than Sun Hung. In addition to that, Wharf Holdings is 2.37 times more volatile than Sun Hung Kai. It trades about 0.02 of its total potential returns per unit of risk. Sun Hung Kai is currently generating about 0.08 per unit of volatility. If you would invest  923.00  in Sun Hung Kai on September 1, 2024 and sell it today you would earn a total of  74.00  from holding Sun Hung Kai or generate 8.02% return on investment over 90 days.

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

Wharf Holdings  vs.  Sun Hung Kai

Wharf Holdings

Risk-Adjusted Performance

1 of 100

Weak

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

Sun Hung Kai

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Sun Hung may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Wharf Holdings and Sun Hung

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

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