Correlation Between Henderson Land and Swire Pacific

Can any of the company-specific risk be diversified away by investing in both Henderson Land and Swire Pacific 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 Henderson Land and Swire Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henderson Land Development and Swire Pacific, you can compare the effects of market volatilities on Henderson Land and Swire Pacific 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 Henderson Land with a short position of Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henderson Land and Swire Pacific.

Diversification Opportunities for Henderson Land and Swire Pacific

-0.47

Correlation Coefficient

Henderson Land  Swire Pacific

Very good diversification

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

Pair Corralation between Henderson Land and Swire Pacific

Assuming the 90 days horizon Henderson Land Development is expected to under-perform the Swire Pacific. In addition to that, Henderson Land is 1.44 times more volatile than Swire Pacific. It trades about -0.49 of its total potential returns per unit of risk. Swire Pacific is currently generating about -0.09 per unit of volatility. If you would invest  895.00  in Swire Pacific on October 11, 2024 and sell it today you would lose (16.00) from holding Swire Pacific or give up 1.79% of portfolio value over 90 days.

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

Henderson Land Development  vs.  Swire Pacific

Henderson Land Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henderson Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental 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.

Swire Pacific

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Swire Pacific may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Henderson Land and Swire Pacific

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

The idea behind Henderson Land Development and Swire Pacific 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.