Correlation Between Chong Hong and Hung Sheng

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

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

Diversification Opportunities for Chong Hong and Hung Sheng

-0.25

Correlation Coefficient

Chong Hong  Hung Sheng

Very good diversification

The 3 months correlation between Chong and Hung is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Hung Sheng Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Sheng Construction and Chong Hong 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 Chong Hong Construction are associated (or correlated) with Hung Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Sheng Construction has no effect on the direction of Chong Hong i.e., Chong Hong and Hung Sheng go up and down completely randomly.

Pair Corralation between Chong Hong and Hung Sheng

Assuming the 90 days trading horizon Chong Hong Construction is expected to under-perform the Hung Sheng. In addition to that, Chong Hong is 1.41 times more volatile than Hung Sheng Construction. It trades about -0.16 of its total potential returns per unit of risk. Hung Sheng Construction is currently generating about 0.07 per unit of volatility. If you would invest  2,530  in Hung Sheng Construction on September 5, 2024 and sell it today you would earn a total of  150.00  from holding Hung Sheng Construction or generate 5.93% return on investment over 90 days.

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

Chong Hong Construction  vs.  Hung Sheng Construction

Chong Hong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chong Hong Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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.

Pair Trading with Chong Hong and Hung Sheng

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

The idea behind Chong Hong Construction and Hung Sheng Construction 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.