Correlation Between China Overseas and Sun Hung

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

By analyzing existing cross correlation between China Overseas Land and Sun Hung Kai, you can compare the effects of market volatilities on China Overseas and Sun Hung 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 China Overseas with a short position of Sun Hung. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Overseas and Sun Hung.

Diversification Opportunities for China Overseas and Sun Hung

0.87

Correlation Coefficient

China Overseas  Sun Hung

Very poor diversification

The 3 months correlation between China and Sun is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai and China Overseas 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 China Overseas Land are associated (or correlated) with Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of China Overseas i.e., China Overseas and Sun Hung go up and down completely randomly.

Pair Corralation between China Overseas and Sun Hung

Assuming the 90 days horizon China Overseas Land is expected to generate 2.92 times more return on investment than Sun Hung. However, China Overseas is 2.92 times more volatile than Sun Hung Kai. It trades about 0.07 of its potential returns per unit of risk. Sun Hung Kai is currently generating about 0.09 per unit of risk. If you would invest  740.00  in China Overseas Land on September 3, 2024 and sell it today you would earn a total of  114.00  from holding China Overseas Land or generate 15.41% return on investment over 90 days.

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

China Overseas Land  vs.  Sun Hung Kai

China Overseas Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

Sun Hung Kai

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Sun Hung may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Overseas and Sun Hung

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

The idea behind China Overseas Land and Sun Hung Kai 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.