Correlation Between Becle SA and Swire Pacific

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

By analyzing existing cross correlation between Becle SA de and Swire Pacific Ltd, you can compare the effects of market volatilities on Becle SA and Swire Pacific 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 Becle SA with a short position of Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Becle SA and Swire Pacific.

Diversification Opportunities for Becle SA and Swire Pacific

-0.32

Correlation Coefficient

Becle SA  Swire Pacific

Very good diversification

The 3 months correlation between Becle and Swire is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Becle SA de and Swire Pacific Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific and Becle SA 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 Becle SA de are associated (or correlated) with Swire Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Pacific has no effect on the direction of Becle SA i.e., Becle SA and Swire Pacific go up and down completely randomly.

Pair Corralation between Becle SA and Swire Pacific

Assuming the 90 days horizon Becle SA de is expected to under-perform the Swire Pacific. In addition to that, Becle SA is 1.15 times more volatile than Swire Pacific Ltd. It trades about -0.07 of its total potential returns per unit of risk. Swire Pacific Ltd is currently generating about 0.03 per unit of volatility. If you would invest  644.00  in Swire Pacific Ltd on September 5, 2024 and sell it today you would earn a total of  24.00  from holding Swire Pacific Ltd or generate 3.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.4%
Values	Daily Returns

Becle SA de  vs.  Swire Pacific Ltd

Becle SA de

Risk-Adjusted Performance

0 of 100

Very Weak

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

Swire Pacific

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Swire Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Becle SA and Swire Pacific

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

The idea behind Becle SA de and Swire Pacific Ltd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.