Correlation Between Wharf Holdings and China Overseas

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

By analyzing existing cross correlation between Wharf Holdings and China Overseas Land, you can compare the effects of market volatilities on Wharf Holdings and China Overseas 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 Wharf Holdings with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wharf Holdings and China Overseas.

Diversification Opportunities for Wharf Holdings and China Overseas

-0.3

Correlation Coefficient

Wharf Holdings  China Overseas

Very good diversification

The 3 months correlation between Wharf and China is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Wharf Holdings and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and Wharf Holdings 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 Wharf Holdings are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Wharf Holdings i.e., Wharf Holdings and China Overseas go up and down completely randomly.

Pair Corralation between Wharf Holdings and China Overseas

Assuming the 90 days horizon Wharf Holdings is expected to under-perform the China Overseas. In addition to that, Wharf Holdings is 1.37 times more volatile than China Overseas Land. It trades about -0.05 of its total potential returns per unit of risk. China Overseas Land is currently generating about 0.11 per unit of volatility. If you would invest  765.00  in China Overseas Land on December 28, 2024 and sell it today you would earn a total of  141.00  from holding China Overseas Land or generate 18.43% return on investment over 90 days.

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

Wharf Holdings  vs.  China Overseas Land

Wharf Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wharf Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

China Overseas Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wharf Holdings and China Overseas

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

The idea behind Wharf Holdings and China Overseas Land 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.