Correlation Between Swire Pacific and Marubeni Corp

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

By analyzing existing cross correlation between Swire Pacific Ltd and Marubeni Corp ADR, you can compare the effects of market volatilities on Swire Pacific and Marubeni Corp 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 Pacific with a short position of Marubeni Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swire Pacific and Marubeni Corp.

Diversification Opportunities for Swire Pacific and Marubeni Corp

0.07

Correlation Coefficient

Swire Pacific  Marubeni Corp

Significant diversification

The 3 months correlation between Swire and Marubeni is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific Ltd and Marubeni Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni Corp ADR and Swire Pacific 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 Pacific Ltd are associated (or correlated) with Marubeni Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni Corp ADR has no effect on the direction of Swire Pacific i.e., Swire Pacific and Marubeni Corp go up and down completely randomly.

Pair Corralation between Swire Pacific and Marubeni Corp

Assuming the 90 days horizon Swire Pacific Ltd is expected to generate 2.11 times more return on investment than Marubeni Corp. However, Swire Pacific is 2.11 times more volatile than Marubeni Corp ADR. It trades about 0.02 of its potential returns per unit of risk. Marubeni Corp ADR is currently generating about -0.08 per unit of risk. If you would invest  670.00  in Swire Pacific Ltd on September 3, 2024 and sell it today you would lose (2.00) from holding Swire Pacific Ltd or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Swire Pacific Ltd  vs.  Marubeni Corp ADR

Swire Pacific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Swire Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Marubeni Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Swire Pacific and Marubeni Corp

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

The idea behind Swire Pacific Ltd and Marubeni Corp ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.