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Should you buy individual Hong Kong-listed stocks or diversify via passive index?

Oct 11, 2018

  • Investors have sold-off Hong Kong-listed Chinese stocks due to growing global uncertainty and the US-China trade war, causing the Hang Seng Index to fall 12.45% YTD.  
  • Correlations of Hong Kong-listed stocks were low through 2017, however, levels have begun to recover. Growing levels of correlation as we move deeper into 2018 should make it harder for individual stock pickers to succeed.  
  • Dispersion of Hong Kong-listed stocks continue to be at healthy levels and suggest a strong risk/reward ratio for individual stocks. 
  • Current levels of correlation paired with healthy levels of dispersion suggest that it is still attractive for investors to pick individual stocks rather than increase their exposure to Hong Kong-listed stocks through a passive index or ETF.

     Source: Capital IQ