Correlation Between PGE Corp and CapitaLand Investment

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

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

Diversification Opportunities for PGE Corp and CapitaLand Investment

-0.72

Correlation Coefficient

PGE Corp  CapitaLand Investment

Pay attention - limited upside

The 3 months correlation between PGE and CapitaLand is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment and PGE Corp 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 PGE Corp are associated (or correlated) with CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of PGE Corp i.e., PGE Corp and CapitaLand Investment go up and down completely randomly.

Pair Corralation between PGE Corp and CapitaLand Investment

Considering the 90-day investment horizon PGE Corp is expected to generate 1.78 times less return on investment than CapitaLand Investment. But when comparing it to its historical volatility, PGE Corp is 4.09 times less risky than CapitaLand Investment. It trades about 0.04 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  227.00  in CapitaLand Investment Limited on September 12, 2024 and sell it today you would lose (28.00) from holding CapitaLand Investment Limited or give up 12.33% of portfolio value over 90 days.

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

PGE Corp  vs.  CapitaLand Investment Limited

PGE Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, PGE Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with PGE Corp and CapitaLand Investment

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

The idea behind PGE Corp and CapitaLand Investment Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.