Correlation Between Vonovia SE and Swire Properties

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

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

Diversification Opportunities for Vonovia SE and Swire Properties

-0.45

Correlation Coefficient

Vonovia SE  Swire Properties

Very good diversification

The 3 months correlation between Vonovia and Swire is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vonovia SE and Swire Properties Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Properties and Vonovia SE 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 Vonovia SE are associated (or correlated) with Swire Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Properties has no effect on the direction of Vonovia SE i.e., Vonovia SE and Swire Properties go up and down completely randomly.

Pair Corralation between Vonovia SE and Swire Properties

Assuming the 90 days horizon Vonovia SE is expected to under-perform the Swire Properties. But the stock apears to be less risky and, when comparing its historical volatility, Vonovia SE is 1.35 times less risky than Swire Properties. The stock trades about -0.15 of its potential returns per unit of risk. The Swire Properties Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Swire Properties Limited on December 26, 2024 and sell it today you would earn a total of  5.00  from holding Swire Properties Limited or generate 2.62% return on investment over 90 days.

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

Vonovia SE  vs.  Swire Properties Limited

Vonovia SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Swire Properties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Swire Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vonovia SE and Swire Properties

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

The idea behind Vonovia SE and Swire Properties Limited 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.