Correlation Between Hongkong Land and Deutsche Wohnen

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

By analyzing existing cross correlation between Hongkong Land Holdings and Deutsche Wohnen SE, you can compare the effects of market volatilities on Hongkong Land and Deutsche Wohnen 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 Hongkong Land with a short position of Deutsche Wohnen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongkong Land and Deutsche Wohnen.

Diversification Opportunities for Hongkong Land and Deutsche Wohnen

0.67

Correlation Coefficient

Hongkong Land  Deutsche Wohnen

Poor diversification

The 3 months correlation between Hongkong and Deutsche is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hongkong Land Holdings and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and Hongkong Land 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 Hongkong Land Holdings are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of Hongkong Land i.e., Hongkong Land and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between Hongkong Land and Deutsche Wohnen

Assuming the 90 days horizon Hongkong Land Holdings is expected to generate 1.27 times more return on investment than Deutsche Wohnen. However, Hongkong Land is 1.27 times more volatile than Deutsche Wohnen SE. It trades about 0.37 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about 0.04 per unit of risk. If you would invest  364.00  in Hongkong Land Holdings on April 20, 2025 and sell it today you would earn a total of  176.00  from holding Hongkong Land Holdings or generate 48.35% return on investment over 90 days.

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

Hongkong Land Holdings  vs.  Deutsche Wohnen SE

Hongkong Land Holdings

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hongkong Land Holdings are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hongkong Land reported solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Wohnen SE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Wohnen SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Deutsche Wohnen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hongkong Land and Deutsche Wohnen

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

The idea behind Hongkong Land Holdings and Deutsche Wohnen SE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.