Correlation Between Sands China and Banyan Tree

Can any of the company-specific risk be diversified away by investing in both Sands China and Banyan Tree 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 Sands China and Banyan Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sands China and Banyan Tree

-0.56

Correlation Coefficient

Sands China  Banyan Tree

Excellent diversification

The 3 months correlation between Sands and Banyan is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sands China and Banyan Tree Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banyan Tree Holdings and Sands China 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 Sands China are associated (or correlated) with Banyan Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banyan Tree Holdings has no effect on the direction of Sands China i.e., Sands China and Banyan Tree go up and down completely randomly.

Pair Corralation between Sands China and Banyan Tree

Assuming the 90 days horizon Sands China is expected to generate 0.63 times more return on investment than Banyan Tree. However, Sands China is 1.6 times less risky than Banyan Tree. It trades about 0.14 of its potential returns per unit of risk. Banyan Tree Holdings is currently generating about -0.09 per unit of risk. If you would invest  171.00  in Sands China on September 13, 2024 and sell it today you would earn a total of  109.00  from holding Sands China or generate 63.74% return on investment over 90 days.

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

Sands China  vs.  Banyan Tree Holdings

Sands China

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sands China are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sands China reported solid returns over the last few months and may actually be approaching a breakup point.

Banyan Tree Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sands China and Banyan Tree

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

The idea behind Sands China and Banyan Tree 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.