Correlation Between Hang Seng and Fentura Financial

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

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

Diversification Opportunities for Hang Seng and Fentura Financial

-0.16

Correlation Coefficient

Hang Seng  Fentura Financial

Good diversification

The 3 months correlation between Hang and Fentura is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and Fentura Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fentura Financial and Hang Seng 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 Hang Seng Bank are associated (or correlated) with Fentura Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fentura Financial has no effect on the direction of Hang Seng i.e., Hang Seng and Fentura Financial go up and down completely randomly.

Pair Corralation between Hang Seng and Fentura Financial

Assuming the 90 days horizon Hang Seng Bank is expected to generate 2.18 times more return on investment than Fentura Financial. However, Hang Seng is 2.18 times more volatile than Fentura Financial. It trades about 0.12 of its potential returns per unit of risk. Fentura Financial is currently generating about 0.18 per unit of risk. If you would invest  1,217  in Hang Seng Bank on September 12, 2024 and sell it today you would earn a total of  56.00  from holding Hang Seng Bank or generate 4.6% return on investment over 90 days.

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

Hang Seng Bank  vs.  Fentura Financial

Hang Seng Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Hang Seng showed solid returns over the last few months and may actually be approaching a breakup point.

Fentura Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fentura Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hang Seng and Fentura Financial

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

The idea behind Hang Seng Bank and Fentura Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.