Correlation Between Vonovia SE and CapitaLand Investment

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

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

Diversification Opportunities for Vonovia SE and CapitaLand Investment

-0.39

Correlation Coefficient

Vonovia SE  CapitaLand Investment

Very good diversification

The 3 months correlation between Vonovia and CapitaLand is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vonovia SE and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Vonovia SE i.e., Vonovia SE and CapitaLand Investment go up and down completely randomly.

Pair Corralation between Vonovia SE and CapitaLand Investment

Assuming the 90 days horizon Vonovia SE is expected to generate 0.69 times more return on investment than CapitaLand Investment. However, Vonovia SE is 1.44 times less risky than CapitaLand Investment. It trades about 0.05 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about 0.01 per unit of risk. If you would invest  2,022  in Vonovia SE on December 2, 2024 and sell it today you would earn a total of  1,156  from holding Vonovia SE or generate 57.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.88%
Values	Daily Returns

Vonovia SE  vs.  CapitaLand Investment 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 nearly stable basic indicators, Vonovia SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Vonovia SE and CapitaLand Investment

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

The idea behind Vonovia SE and CapitaLand Investment 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.