Correlation Between Stockland and Ascott Residence

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

By analyzing existing cross correlation between Stockland and Ascott Residence Trust, you can compare the effects of market volatilities on Stockland and Ascott Residence 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 Stockland with a short position of Ascott Residence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stockland and Ascott Residence.

Diversification Opportunities for Stockland and Ascott Residence

-0.42

Correlation Coefficient

Stockland  Ascott Residence

Very good diversification

The 3 months correlation between Stockland and Ascott is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Stockland and Ascott Residence Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascott Residence Trust and Stockland 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 Stockland are associated (or correlated) with Ascott Residence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascott Residence Trust has no effect on the direction of Stockland i.e., Stockland and Ascott Residence go up and down completely randomly.

Pair Corralation between Stockland and Ascott Residence

Assuming the 90 days horizon Stockland is expected to generate 2.59 times more return on investment than Ascott Residence. However, Stockland is 2.59 times more volatile than Ascott Residence Trust. It trades about 0.02 of its potential returns per unit of risk. Ascott Residence Trust is currently generating about -0.08 per unit of risk. If you would invest  311.00  in Stockland on December 21, 2024 and sell it today you would lose (1.00) from holding Stockland or give up 0.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.33%
Values	Daily Returns

Stockland  vs.  Ascott Residence Trust

Stockland

Risk-Adjusted Performance

Weak

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

Ascott Residence Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ascott Residence Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Stockland and Ascott Residence

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

The idea behind Stockland and Ascott Residence Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.