Correlation Between Sino AG and Hongkong Land

Can any of the company-specific risk be diversified away by investing in both Sino AG and Hongkong Land 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 Sino AG and Hongkong Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sino AG and Hongkong Land

0.72

Correlation Coefficient

Sino AG  Hongkong Land

Poor diversification

The 3 months correlation between Sino and Hongkong is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sino AG and Hongkong Land Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongkong Land Holdings and Sino AG 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 Sino AG are associated (or correlated) with Hongkong Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongkong Land Holdings has no effect on the direction of Sino AG i.e., Sino AG and Hongkong Land go up and down completely randomly.

Pair Corralation between Sino AG and Hongkong Land

Assuming the 90 days horizon Sino AG is expected to generate 1.27 times more return on investment than Hongkong Land. However, Sino AG is 1.27 times more volatile than Hongkong Land Holdings. It trades about 0.12 of its potential returns per unit of risk. Hongkong Land Holdings is currently generating about 0.08 per unit of risk. If you would invest  2,850  in Sino AG on October 5, 2024 and sell it today you would earn a total of  3,600  from holding Sino AG or generate 126.32% return on investment over 90 days.

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

Sino AG  vs.  Hongkong Land Holdings

Sino AG

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sino AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Sino AG reported solid returns over the last few months and may actually be approaching a breakup point.

Hongkong Land Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Hongkong Land Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Hongkong Land reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sino AG and Hongkong Land

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

The idea behind Sino AG and Hongkong Land 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.