Correlation Between City Developments and Wilmar International

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

By analyzing existing cross correlation between City Developments and Wilmar International, you can compare the effects of market volatilities on City Developments and Wilmar International 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 Wilmar International. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and Wilmar International.

Diversification Opportunities for City Developments and Wilmar International

0.8

Correlation Coefficient

City Developments  Wilmar International

Very poor diversification

The 3 months correlation between City and Wilmar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding City Developments and Wilmar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of City Developments i.e., City Developments and Wilmar International go up and down completely randomly.

Pair Corralation between City Developments and Wilmar International

Assuming the 90 days horizon City Developments is expected to generate 1.36 times more return on investment than Wilmar International. However, City Developments is 1.36 times more volatile than Wilmar International. It trades about -0.03 of its potential returns per unit of risk. Wilmar International is currently generating about -0.12 per unit of risk. If you would invest  399.00  in City Developments on October 12, 2024 and sell it today you would lose (26.00) from holding City Developments or give up 6.52% of portfolio value over 90 days.

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

City Developments  vs.  Wilmar International

City Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Developments has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Wilmar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmar International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with City Developments and Wilmar International

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

The idea behind City Developments and Wilmar International 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.