Correlation Between Hung Sheng and U Ming

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

By analyzing existing cross correlation between Hung Sheng Construction and U Ming Marine Transport, you can compare the effects of market volatilities on Hung Sheng and U Ming 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 Hung Sheng with a short position of U Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hung Sheng and U Ming.

Diversification Opportunities for Hung Sheng and U Ming

0.42

Correlation Coefficient

Hung Sheng  U Ming

Very weak diversification

The 3 months correlation between Hung and 2606 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and U Ming Marine Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Ming Marine and Hung Sheng 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 Hung Sheng Construction are associated (or correlated) with U Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Ming Marine has no effect on the direction of Hung Sheng i.e., Hung Sheng and U Ming go up and down completely randomly.

Pair Corralation between Hung Sheng and U Ming

Assuming the 90 days trading horizon Hung Sheng is expected to generate 3.24 times less return on investment than U Ming. In addition to that, Hung Sheng is 1.33 times more volatile than U Ming Marine Transport. It trades about 0.03 of its total potential returns per unit of risk. U Ming Marine Transport is currently generating about 0.15 per unit of volatility. If you would invest  5,310  in U Ming Marine Transport on September 3, 2024 and sell it today you would earn a total of  650.00  from holding U Ming Marine Transport or generate 12.24% return on investment over 90 days.

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

Hung Sheng Construction  vs.  U Ming Marine Transport

Hung Sheng Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Sheng Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hung Sheng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

U Ming Marine

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hung Sheng and U Ming

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

The idea behind Hung Sheng Construction and U Ming Marine Transport 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 Stocks Directory module to find actively traded stocks across global markets.