Correlation Between Hung Sheng and Tong Tai

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

Diversification Opportunities for Hung Sheng and Tong Tai

-0.09

Correlation Coefficient

Hung Sheng  Tong Tai

Good diversification

The 3 months correlation between Hung and Tong is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Tong Tai Machine Tool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Tai Machine 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 Tong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Tai Machine has no effect on the direction of Hung Sheng i.e., Hung Sheng and Tong Tai go up and down completely randomly.

Pair Corralation between Hung Sheng and Tong Tai

Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 0.53 times more return on investment than Tong Tai. However, Hung Sheng Construction is 1.88 times less risky than Tong Tai. It trades about 0.01 of its potential returns per unit of risk. Tong Tai Machine Tool is currently generating about -0.05 per unit of risk. If you would invest  2,705  in Hung Sheng Construction on September 1, 2024 and sell it today you would lose (10.00) from holding Hung Sheng Construction or give up 0.37% of portfolio value over 90 days.

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

Hung Sheng Construction  vs.  Tong Tai Machine Tool

Hung Sheng Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hung Sheng Construction has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Tong Tai Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Tai Machine Tool has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hung Sheng and Tong Tai

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

The idea behind Hung Sheng Construction and Tong Tai Machine Tool 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.