Correlation Between CHINA EDUCATION and Swire Properties

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

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

Diversification Opportunities for CHINA EDUCATION and Swire Properties

0.05

Correlation Coefficient

CHINA EDUCATION  Swire Properties

Significant diversification

The 3 months correlation between CHINA and Swire is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and Swire Properties Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Properties and CHINA EDUCATION 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 CHINA EDUCATION GROUP 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 CHINA EDUCATION i.e., CHINA EDUCATION and Swire Properties go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and Swire Properties

Assuming the 90 days horizon CHINA EDUCATION is expected to generate 2.07 times less return on investment than Swire Properties. In addition to that, CHINA EDUCATION is 1.06 times more volatile than Swire Properties Limited. It trades about 0.03 of its total potential returns per unit of risk. Swire Properties Limited is currently generating about 0.07 per unit of volatility. If you would invest  68.00  in Swire Properties Limited on September 28, 2024 and sell it today you would earn a total of  120.00  from holding Swire Properties Limited or generate 176.47% return on investment over 90 days.

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

CHINA EDUCATION GROUP  vs.  Swire Properties Limited

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic 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 Properties

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swire Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CHINA EDUCATION and Swire Properties

The main advantage of trading using opposite CHINA EDUCATION and Swire Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION 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 CHINA EDUCATION GROUP 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..