Correlation Between Prime Lands and Trans Asia

Can any of the company-specific risk be diversified away by investing in both Prime Lands and Trans Asia 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 Prime Lands and Trans Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prime Lands Residencies and Trans Asia Hotels, you can compare the effects of market volatilities on Prime Lands and Trans Asia 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 Prime Lands with a short position of Trans Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Lands and Trans Asia.

Diversification Opportunities for Prime Lands and Trans Asia

0.65

Correlation Coefficient

Prime Lands  Trans Asia

Poor diversification

The 3 months correlation between Prime and Trans is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prime Lands Residencies and Trans Asia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trans Asia Hotels and Prime Lands 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 Prime Lands Residencies are associated (or correlated) with Trans Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trans Asia Hotels has no effect on the direction of Prime Lands i.e., Prime Lands and Trans Asia go up and down completely randomly.

Pair Corralation between Prime Lands and Trans Asia

Assuming the 90 days trading horizon Prime Lands Residencies is expected to generate 1.27 times more return on investment than Trans Asia. However, Prime Lands is 1.27 times more volatile than Trans Asia Hotels. It trades about 0.23 of its potential returns per unit of risk. Trans Asia Hotels is currently generating about 0.06 per unit of risk. If you would invest  810.00  in Prime Lands Residencies on September 17, 2024 and sell it today you would earn a total of  290.00  from holding Prime Lands Residencies or generate 35.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.67%
Values	Daily Returns

Prime Lands Residencies  vs.  Trans Asia Hotels

Prime Lands Residencies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Lands Residencies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prime Lands sustained solid returns over the last few months and may actually be approaching a breakup point.

Trans Asia Hotels

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trans Asia Hotels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trans Asia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prime Lands and Trans Asia

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

The idea behind Prime Lands Residencies and Trans Asia Hotels 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.