Correlation Between CapitaLand Investment and WisdomTree Investments

Can any of the company-specific risk be diversified away by investing in both CapitaLand Investment and WisdomTree Investments 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 CapitaLand Investment and WisdomTree Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CapitaLand Investment Limited and WisdomTree Investments, you can compare the effects of market volatilities on CapitaLand Investment and WisdomTree Investments 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 CapitaLand Investment with a short position of WisdomTree Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of CapitaLand Investment and WisdomTree Investments.

Diversification Opportunities for CapitaLand Investment and WisdomTree Investments

0.83

Correlation Coefficient

CapitaLand Investment  WisdomTree Investments

Very poor diversification

The 3 months correlation between CapitaLand and WisdomTree is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments and CapitaLand Investment 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 CapitaLand Investment Limited are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of CapitaLand Investment i.e., CapitaLand Investment and WisdomTree Investments go up and down completely randomly.

Pair Corralation between CapitaLand Investment and WisdomTree Investments

Assuming the 90 days horizon CapitaLand Investment Limited is expected to generate 1.15 times more return on investment than WisdomTree Investments. However, CapitaLand Investment is 1.15 times more volatile than WisdomTree Investments. It trades about -0.06 of its potential returns per unit of risk. WisdomTree Investments is currently generating about -0.28 per unit of risk. If you would invest  193.00  in CapitaLand Investment Limited on December 1, 2024 and sell it today you would lose (12.00) from holding CapitaLand Investment Limited or give up 6.22% of portfolio value over 90 days.

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

CapitaLand Investment Limited  vs.  WisdomTree Investments

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CapitaLand Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Investments 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CapitaLand Investment and WisdomTree Investments

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

The idea behind CapitaLand Investment Limited and WisdomTree Investments 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.