Correlation Between Swire Pacific and New World

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

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

Diversification Opportunities for Swire Pacific and New World

0.61

Correlation Coefficient

Swire Pacific  New World

Poor diversification

The 3 months correlation between Swire and New is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Swire Pacific i.e., Swire Pacific and New World go up and down completely randomly.

Pair Corralation between Swire Pacific and New World

Assuming the 90 days horizon Swire Pacific is expected to generate 0.26 times more return on investment than New World. However, Swire Pacific is 3.87 times less risky than New World. It trades about -0.06 of its potential returns per unit of risk. New World Development is currently generating about -0.14 per unit of risk. If you would invest  843.00  in Swire Pacific on September 2, 2024 and sell it today you would lose (20.00) from holding Swire Pacific or give up 2.37% of portfolio value over 90 days.

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

Swire Pacific  vs.  New World Development

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.

New World Development

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swire Pacific and New World

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

The idea behind Swire Pacific and New World Development 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.