Correlation Between Hung Sheng and Solid State

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

Diversification Opportunities for Hung Sheng and Solid State

0.22

Correlation Coefficient

Hung Sheng  Solid State

Modest diversification

The 3 months correlation between Hung and Solid is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Solid State System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid State System 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 Solid State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid State System has no effect on the direction of Hung Sheng i.e., Hung Sheng and Solid State go up and down completely randomly.

Pair Corralation between Hung Sheng and Solid State

Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 0.74 times more return on investment than Solid State. However, Hung Sheng Construction is 1.36 times less risky than Solid State. It trades about 0.07 of its potential returns per unit of risk. Solid State System is currently generating about -0.03 per unit of risk. If you would invest  2,510  in Hung Sheng Construction on September 4, 2024 and sell it today you would earn a total of  170.00  from holding Hung Sheng Construction or generate 6.77% return on investment over 90 days.

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

Hung Sheng Construction  vs.  Solid State System

Hung Sheng Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Sheng Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hung Sheng may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Solid State System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid State System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Solid State is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hung Sheng and Solid State

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

The idea behind Hung Sheng Construction and Solid State System 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.