Correlation Between SJM Holdings and Sands China

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

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

Diversification Opportunities for SJM Holdings and Sands China

0.47

Correlation Coefficient

SJM Holdings  Sands China

Very weak diversification

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

Pair Corralation between SJM Holdings and Sands China

Assuming the 90 days horizon SJM Holdings is expected to generate 1.82 times less return on investment than Sands China. In addition to that, SJM Holdings is 1.78 times more volatile than Sands China Ltd. It trades about 0.06 of its total potential returns per unit of risk. Sands China Ltd is currently generating about 0.2 per unit of volatility. If you would invest  1,750  in Sands China Ltd on September 13, 2024 and sell it today you would earn a total of  953.00  from holding Sands China Ltd or generate 54.46% return on investment over 90 days.

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

SJM Holdings Ltd  vs.  Sands China Ltd

SJM Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SJM Holdings Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, SJM Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Sands China

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sands China Ltd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sands China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SJM Holdings and Sands China

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

The idea behind SJM Holdings Ltd and Sands China Ltd 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..