Correlation Between Hung Sheng and Fu Burg

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

Diversification Opportunities for Hung Sheng and Fu Burg

0.53

Correlation Coefficient

Hung Sheng  Fu Burg

Very weak diversification

The 3 months correlation between Hung and 8929 is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Fu Burg Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fu Burg Industrial 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 Fu Burg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fu Burg Industrial has no effect on the direction of Hung Sheng i.e., Hung Sheng and Fu Burg go up and down completely randomly.

Pair Corralation between Hung Sheng and Fu Burg

Assuming the 90 days trading horizon Hung Sheng is expected to generate 4.72 times less return on investment than Fu Burg. But when comparing it to its historical volatility, Hung Sheng Construction is 2.99 times less risky than Fu Burg. It trades about 0.03 of its potential returns per unit of risk. Fu Burg Industrial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,435  in Fu Burg Industrial on September 26, 2024 and sell it today you would earn a total of  150.00  from holding Fu Burg Industrial or generate 6.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Hung Sheng Construction  vs.  Fu Burg Industrial

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.

Fu Burg Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fu Burg Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fu Burg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hung Sheng and Fu Burg

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

The idea behind Hung Sheng Construction and Fu Burg Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.