Correlation Between China Overseas and Daiwa House
Can any of the company-specific risk be diversified away by investing in both China Overseas and Daiwa House 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 Overseas and Daiwa House into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Overseas Land and Daiwa House Industry, you can compare the effects of market volatilities on China Overseas and Daiwa House 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 Overseas with a short position of Daiwa House. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Overseas and Daiwa House.
Diversification Opportunities for China Overseas and Daiwa House
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Daiwa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry and China Overseas 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 Overseas Land are associated (or correlated) with Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of China Overseas i.e., China Overseas and Daiwa House go up and down completely randomly.
Pair Corralation between China Overseas and Daiwa House
Assuming the 90 days horizon China Overseas Land is expected to generate 2.21 times more return on investment than Daiwa House. However, China Overseas is 2.21 times more volatile than Daiwa House Industry. It trades about 0.11 of its potential returns per unit of risk. Daiwa House Industry is currently generating about 0.13 per unit of risk. If you would invest 765.00 in China Overseas Land on December 28, 2024 and sell it today you would earn a total of 141.00 from holding China Overseas Land or generate 18.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
China Overseas Land vs. Daiwa House Industry
Performance |
Timeline |
China Overseas Land |
Daiwa House Industry |
China Overseas and Daiwa House Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Overseas and Daiwa House
The main advantage of trading using opposite China Overseas and Daiwa House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Overseas position performs unexpectedly, Daiwa House 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 Daiwa House will offset losses from the drop in Daiwa House's long position.China Overseas vs. Longfor Group Holdings | China Overseas vs. Sun Hung Kai | China Overseas vs. Sino Land Co | China Overseas vs. Sun Hung Kai |
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Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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