Correlation Between CapitaLand Investment and Asia Pptys

Can any of the company-specific risk be diversified away by investing in both CapitaLand Investment and Asia Pptys 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 CapitaLand Investment and Asia Pptys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CapitaLand Investment Limited and Asia Pptys, you can compare the effects of market volatilities on CapitaLand Investment and Asia Pptys 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 CapitaLand Investment with a short position of Asia Pptys. Check out your portfolio center. Please also check ongoing floating volatility patterns of CapitaLand Investment and Asia Pptys.

Diversification Opportunities for CapitaLand Investment and Asia Pptys

0.38

Correlation Coefficient

CapitaLand Investment  Asia Pptys

Weak diversification

The 3 months correlation between CapitaLand and Asia is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and Asia Pptys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pptys and CapitaLand Investment 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 CapitaLand Investment Limited are associated (or correlated) with Asia Pptys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pptys has no effect on the direction of CapitaLand Investment i.e., CapitaLand Investment and Asia Pptys go up and down completely randomly.

Pair Corralation between CapitaLand Investment and Asia Pptys

Assuming the 90 days horizon CapitaLand Investment is expected to generate 12.35 times less return on investment than Asia Pptys. But when comparing it to its historical volatility, CapitaLand Investment Limited is 14.87 times less risky than Asia Pptys. It trades about 0.19 of its potential returns per unit of risk. Asia Pptys is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Asia Pptys on September 15, 2024 and sell it today you would earn a total of  2.90  from holding Asia Pptys or generate 58.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

CapitaLand Investment Limited  vs.  Asia Pptys

CapitaLand Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, CapitaLand Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Asia Pptys

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pptys are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Asia Pptys showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CapitaLand Investment and Asia Pptys

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

The idea behind CapitaLand Investment Limited and Asia Pptys 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.