Correlation Between Longfor Properties and Wharf Holdings

Can any of the company-specific risk be diversified away by investing in both Longfor Properties and Wharf Holdings 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 Longfor Properties and Wharf Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Longfor Properties Co and Wharf Holdings, you can compare the effects of market volatilities on Longfor Properties and Wharf Holdings 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 Longfor Properties with a short position of Wharf Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longfor Properties and Wharf Holdings.

Diversification Opportunities for Longfor Properties and Wharf Holdings

-0.23

Correlation Coefficient

Longfor Properties  Wharf Holdings

Very good diversification

The 3 months correlation between Longfor and Wharf is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Longfor Properties Co and Wharf Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf Holdings and Longfor Properties 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 Longfor Properties Co are associated (or correlated) with Wharf Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wharf Holdings has no effect on the direction of Longfor Properties i.e., Longfor Properties and Wharf Holdings go up and down completely randomly.

Pair Corralation between Longfor Properties and Wharf Holdings

Assuming the 90 days horizon Longfor Properties Co is expected to generate 0.7 times more return on investment than Wharf Holdings. However, Longfor Properties Co is 1.43 times less risky than Wharf Holdings. It trades about 0.03 of its potential returns per unit of risk. Wharf Holdings is currently generating about -0.05 per unit of risk. If you would invest  1,278  in Longfor Properties Co on December 29, 2024 and sell it today you would earn a total of  41.00  from holding Longfor Properties Co or generate 3.21% return on investment over 90 days.

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

Longfor Properties Co  vs.  Wharf Holdings

Longfor Properties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Longfor Properties Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Longfor Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wharf Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wharf Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Longfor Properties and Wharf Holdings

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

The idea behind Longfor Properties Co and Wharf Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.