Correlation Between Swire Properties and Wharf Real

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

By analyzing existing cross correlation between Swire Properties Limited and Wharf Real Estate, you can compare the effects of market volatilities on Swire Properties and Wharf Real 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 Swire Properties with a short position of Wharf Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swire Properties and Wharf Real.

Diversification Opportunities for Swire Properties and Wharf Real

0.11

Correlation Coefficient

Swire Properties  Wharf Real

Average diversification

The 3 months correlation between Swire and Wharf is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Swire Properties Limited and Wharf Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf Real Estate and Swire Properties 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 Swire Properties Limited are associated (or correlated) with Wharf Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wharf Real Estate has no effect on the direction of Swire Properties i.e., Swire Properties and Wharf Real go up and down completely randomly.

Pair Corralation between Swire Properties and Wharf Real

Assuming the 90 days horizon Swire Properties Limited is expected to generate 1.27 times more return on investment than Wharf Real. However, Swire Properties is 1.27 times more volatile than Wharf Real Estate. It trades about 0.07 of its potential returns per unit of risk. Wharf Real Estate is currently generating about -0.07 per unit of risk. If you would invest  168.00  in Swire Properties Limited on September 24, 2024 and sell it today you would earn a total of  20.00  from holding Swire Properties Limited or generate 11.9% return on investment over 90 days.

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

Swire Properties Limited  vs.  Wharf Real Estate

Swire Properties

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swire Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Wharf Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wharf Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic 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 Swire Properties and Wharf Real

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

The idea behind Swire Properties Limited and Wharf Real Estate 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.