Correlation Between Swire Pacific and CLP Holdings

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

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

Diversification Opportunities for Swire Pacific and CLP Holdings

-0.37

Correlation Coefficient

Swire Pacific  CLP Holdings

Very good diversification

The 3 months correlation between Swire and CLP is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific and CLP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLP Holdings and Swire Pacific 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 Swire Pacific are associated (or correlated) with CLP Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLP Holdings has no effect on the direction of Swire Pacific i.e., Swire Pacific and CLP Holdings go up and down completely randomly.

Pair Corralation between Swire Pacific and CLP Holdings

Assuming the 90 days horizon Swire Pacific is expected to generate 1.59 times more return on investment than CLP Holdings. However, Swire Pacific is 1.59 times more volatile than CLP Holdings. It trades about 0.03 of its potential returns per unit of risk. CLP Holdings is currently generating about 0.03 per unit of risk. If you would invest  714.00  in Swire Pacific on October 10, 2024 and sell it today you would earn a total of  176.00  from holding Swire Pacific or generate 24.65% return on investment over 90 days.

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

Swire Pacific  vs.  CLP Holdings

Swire Pacific

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Swire Pacific may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CLP Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLP Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, CLP Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swire Pacific and CLP Holdings

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

The idea behind Swire Pacific and CLP 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.