Correlation Between City Developments and UOL Group

Can any of the company-specific risk be diversified away by investing in both City Developments and UOL Group 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 City Developments and UOL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between City Developments and UOL Group Ltd, you can compare the effects of market volatilities on City Developments and UOL Group 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 City Developments with a short position of UOL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and UOL Group.

Diversification Opportunities for City Developments and UOL Group

0.47

Correlation Coefficient

City Developments  UOL Group

Very weak diversification

The 3 months correlation between City and UOL is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding City Developments and UOL Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOL Group and City Developments 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 City Developments are associated (or correlated) with UOL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOL Group has no effect on the direction of City Developments i.e., City Developments and UOL Group go up and down completely randomly.

Pair Corralation between City Developments and UOL Group

Assuming the 90 days horizon City Developments is expected to generate 2.96 times less return on investment than UOL Group. But when comparing it to its historical volatility, City Developments is 1.07 times less risky than UOL Group. It trades about 0.04 of its potential returns per unit of risk. UOL Group Ltd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,536  in UOL Group Ltd on December 17, 2024 and sell it today you would earn a total of  257.00  from holding UOL Group Ltd or generate 16.73% return on investment over 90 days.

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

City Developments  vs.  UOL Group Ltd

City Developments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City Developments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, City Developments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

UOL Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UOL Group Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, UOL Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City Developments and UOL Group

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

The idea behind City Developments and UOL Group 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.