Correlation Between Deutsche Wohnen and China Overseas
Can any of the company-specific risk be diversified away by investing in both Deutsche Wohnen 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 Deutsche Wohnen and China Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Wohnen SE and China Overseas Land, you can compare the effects of market volatilities on Deutsche Wohnen 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 Deutsche Wohnen with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Wohnen and China Overseas.
Diversification Opportunities for Deutsche Wohnen and China Overseas
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Deutsche and China is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Wohnen SE 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 Deutsche Wohnen 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 Deutsche Wohnen SE 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 Deutsche Wohnen i.e., Deutsche Wohnen and China Overseas go up and down completely randomly.
Pair Corralation between Deutsche Wohnen and China Overseas
Assuming the 90 days trading horizon Deutsche Wohnen SE is expected to under-perform the China Overseas. But the stock apears to be less risky and, when comparing its historical volatility, Deutsche Wohnen SE is 3.13 times less risky than China Overseas. The stock trades about -0.05 of its potential returns per unit of risk. The China Overseas Land is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 141.00 in China Overseas Land on September 24, 2024 and sell it today you would earn a total of 9.00 from holding China Overseas Land or generate 6.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Deutsche Wohnen SE vs. China Overseas Land
Performance |
Timeline |
Deutsche Wohnen SE |
China Overseas Land |
Deutsche Wohnen and China Overseas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deutsche Wohnen and China Overseas
The main advantage of trading using opposite Deutsche Wohnen and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Wohnen 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.Deutsche Wohnen vs. Sun Hung Kai | Deutsche Wohnen vs. China Overseas Land | Deutsche Wohnen vs. Longfor Group Holdings | Deutsche Wohnen vs. Mitsui Fudosan Co |
China Overseas vs. Sun Hung Kai | China Overseas vs. Longfor Group Holdings | China Overseas vs. Mitsui Fudosan Co | China Overseas vs. Mitsubishi Estate Co |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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