Correlation Between Wharf Real and Swire Properties

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

By analyzing existing cross correlation between Wharf Real Estate and Swire Properties Limited, you can compare the effects of market volatilities on Wharf Real and Swire Properties 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 Wharf Real with a short position of Swire Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wharf Real and Swire Properties.

Diversification Opportunities for Wharf Real and Swire Properties

0.23

Correlation Coefficient

Wharf Real  Swire Properties

Modest diversification

The 3 months correlation between Wharf and Swire is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Wharf Real Estate and Swire Properties Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Properties and Wharf Real 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 Wharf Real Estate are associated (or correlated) with Swire Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Properties has no effect on the direction of Wharf Real i.e., Wharf Real and Swire Properties go up and down completely randomly.

Pair Corralation between Wharf Real and Swire Properties

Assuming the 90 days horizon Wharf Real Estate is expected to under-perform the Swire Properties. But the stock apears to be less risky and, when comparing its historical volatility, Wharf Real Estate is 1.21 times less risky than Swire Properties. The stock trades about -0.23 of its potential returns per unit of risk. The Swire Properties Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Swire Properties Limited on October 12, 2024 and sell it today you would lose (17.00) from holding Swire Properties Limited or give up 8.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Wharf Real Estate  vs.  Swire Properties Limited

Wharf Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wharf Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Swire Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swire Properties Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Wharf Real and Swire Properties

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

The idea behind Wharf Real Estate and Swire Properties Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.