Correlation Between Swire Pacific and Marubeni

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

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

Diversification Opportunities for Swire Pacific and Marubeni

0.08

Correlation Coefficient

Swire Pacific  Marubeni

Significant diversification

The 3 months correlation between Swire and Marubeni is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific and Marubeni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni 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 Marubeni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni has no effect on the direction of Swire Pacific i.e., Swire Pacific and Marubeni go up and down completely randomly.

Pair Corralation between Swire Pacific and Marubeni

Assuming the 90 days horizon Swire Pacific is expected to generate 1.49 times less return on investment than Marubeni. But when comparing it to its historical volatility, Swire Pacific is 2.42 times less risky than Marubeni. It trades about 0.02 of its potential returns per unit of risk. Marubeni is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,626  in Marubeni on September 3, 2024 and sell it today you would lose (38.00) from holding Marubeni or give up 2.34% of portfolio value over 90 days.

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

Swire Pacific  vs.  Marubeni

Swire Pacific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Marubeni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marubeni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marubeni is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Swire Pacific and Marubeni

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

The idea behind Swire Pacific and Marubeni 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.