Correlation Between Five Point and Alset Ehome

Can any of the company-specific risk be diversified away by investing in both Five Point and Alset Ehome 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 Five Point and Alset Ehome into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Five Point Holdings and Alset Ehome International, you can compare the effects of market volatilities on Five Point and Alset Ehome 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 Five Point with a short position of Alset Ehome. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Point and Alset Ehome.

Diversification Opportunities for Five Point and Alset Ehome

0.64

Correlation Coefficient

Five Point  Alset Ehome

Poor diversification

The 3 months correlation between Five and Alset is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Five Point Holdings and Alset Ehome International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alset Ehome International and Five Point 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 Five Point Holdings are associated (or correlated) with Alset Ehome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alset Ehome International has no effect on the direction of Five Point i.e., Five Point and Alset Ehome go up and down completely randomly.

Pair Corralation between Five Point and Alset Ehome

Considering the 90-day investment horizon Five Point is expected to generate 1.11 times less return on investment than Alset Ehome. But when comparing it to its historical volatility, Five Point Holdings is 3.09 times less risky than Alset Ehome. It trades about 0.13 of its potential returns per unit of risk. Alset Ehome International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Alset Ehome International on September 4, 2024 and sell it today you would earn a total of  3.00  from holding Alset Ehome International or generate 2.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Five Point Holdings  vs.  Alset Ehome International

Five Point Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Five Point Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Five Point demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Alset Ehome International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alset Ehome International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical and fundamental indicators, Alset Ehome demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Five Point and Alset Ehome

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

The idea behind Five Point Holdings and Alset Ehome 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.