Correlation Between Caixabank and Hang Seng

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

By analyzing existing cross correlation between Caixabank SA ADR and Hang Seng Bank, you can compare the effects of market volatilities on Caixabank and Hang Seng 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 Caixabank with a short position of Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Hang Seng.

Diversification Opportunities for Caixabank and Hang Seng

0.0

Correlation Coefficient

Caixabank  Hang Seng

Pay attention - limited upside

The 3 months correlation between Caixabank and Hang is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank and Caixabank 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 Caixabank SA ADR are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Caixabank i.e., Caixabank and Hang Seng go up and down completely randomly.

Pair Corralation between Caixabank and Hang Seng

Assuming the 90 days horizon Caixabank SA ADR is expected to under-perform the Hang Seng. In addition to that, Caixabank is 1.06 times more volatile than Hang Seng Bank. It trades about -0.03 of its total potential returns per unit of risk. Hang Seng Bank is currently generating about 0.03 per unit of volatility. If you would invest  1,160  in Hang Seng Bank on September 4, 2024 and sell it today you would earn a total of  32.00  from holding Hang Seng Bank or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Caixabank SA ADR  vs.  Hang Seng Bank

Caixabank SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Caixabank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hang Seng Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hang Seng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caixabank and Hang Seng

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

The idea behind Caixabank SA ADR and Hang Seng Bank 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.