Correlation Between Sino Land and Deutsche Wohnen

Can any of the company-specific risk be diversified away by investing in both Sino Land and Deutsche Wohnen 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 Sino Land and Deutsche Wohnen into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sino Land and Deutsche Wohnen

-0.44

Correlation Coefficient

Sino Land  Deutsche Wohnen

Very good diversification

The 3 months correlation between Sino and Deutsche is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sino Land and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and Sino Land 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 Sino Land are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of Sino Land i.e., Sino Land and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between Sino Land and Deutsche Wohnen

Assuming the 90 days horizon Sino Land is expected to generate 2.51 times more return on investment than Deutsche Wohnen. However, Sino Land is 2.51 times more volatile than Deutsche Wohnen SE. It trades about 0.15 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about 0.05 per unit of risk. If you would invest  54.00  in Sino Land on September 16, 2024 and sell it today you would earn a total of  43.00  from holding Sino Land or generate 79.63% return on investment over 90 days.

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

Sino Land  vs.  Deutsche Wohnen SE

Sino Land

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Land are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sino Land reported solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Wohnen SE

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sino Land and Deutsche Wohnen

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

The idea behind Sino Land and Deutsche Wohnen SE 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.