Correlation Between Longfor Group and Wharf Holdings

Can any of the company-specific risk be diversified away by investing in both Longfor Group 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 Group 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 Group Holdings and Wharf Holdings, you can compare the effects of market volatilities on Longfor Group 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 Group with a short position of Wharf Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longfor Group and Wharf Holdings.

Diversification Opportunities for Longfor Group and Wharf Holdings

0.29

Correlation Coefficient

Longfor Group  Wharf Holdings

Modest diversification

The 3 months correlation between Longfor and Wharf is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Longfor Group Holdings and Wharf Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf Holdings and Longfor Group 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 Group Holdings 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 Group i.e., Longfor Group and Wharf Holdings go up and down completely randomly.

Pair Corralation between Longfor Group and Wharf Holdings

Assuming the 90 days horizon Longfor Group Holdings is expected to under-perform the Wharf Holdings. In addition to that, Longfor Group is 1.01 times more volatile than Wharf Holdings. It trades about -0.25 of its total potential returns per unit of risk. Wharf Holdings is currently generating about -0.06 per unit of volatility. If you would invest  526.00  in Wharf Holdings on December 2, 2024 and sell it today you would lose (66.00) from holding Wharf Holdings or give up 12.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Longfor Group Holdings  vs.  Wharf Holdings

Longfor Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Group and Wharf Holdings

The main advantage of trading using opposite Longfor Group and Wharf Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longfor Group 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 Group Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.