Correlation Between Swire Pacific and Jardine Cycle

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

By analyzing existing cross correlation between Swire Pacific and Jardine Cycle Carriage, you can compare the effects of market volatilities on Swire Pacific and Jardine Cycle 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 Jardine Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swire Pacific and Jardine Cycle.

Diversification Opportunities for Swire Pacific and Jardine Cycle

-0.43

Correlation Coefficient

Swire Pacific  Jardine Cycle

Very good diversification

The 3 months correlation between Swire and Jardine is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific and Jardine Cycle Carriage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Cycle Carriage 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 Jardine Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Cycle Carriage has no effect on the direction of Swire Pacific i.e., Swire Pacific and Jardine Cycle go up and down completely randomly.

Pair Corralation between Swire Pacific and Jardine Cycle

Assuming the 90 days horizon Swire Pacific is expected to under-perform the Jardine Cycle. In addition to that, Swire Pacific is 1.59 times more volatile than Jardine Cycle Carriage. It trades about -0.01 of its total potential returns per unit of risk. Jardine Cycle Carriage is currently generating about 0.15 per unit of volatility. If you would invest  1,950  in Jardine Cycle Carriage on December 1, 2024 and sell it today you would earn a total of  175.00  from holding Jardine Cycle Carriage or generate 8.97% return on investment over 90 days.

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

Swire Pacific  vs.  Jardine Cycle Carriage

Swire Pacific

Risk-Adjusted Performance

Very Weak

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

Jardine Cycle Carriage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jardine Cycle Carriage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Jardine Cycle may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Swire Pacific and Jardine Cycle

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

The idea behind Swire Pacific and Jardine Cycle Carriage 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.