Correlation Between Country Garden and Swire Properties

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

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

Diversification Opportunities for Country Garden and Swire Properties

-0.04

Correlation Coefficient

Country Garden  Swire Properties

Good diversification

The 3 months correlation between Country and Swire is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Country Garden Services and Swire Properties Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Properties and Country Garden 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 Country Garden Services are associated (or correlated) with Swire Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Properties has no effect on the direction of Country Garden i.e., Country Garden and Swire Properties go up and down completely randomly.

Pair Corralation between Country Garden and Swire Properties

Assuming the 90 days horizon Country Garden Services is expected to under-perform the Swire Properties. In addition to that, Country Garden is 1.2 times more volatile than Swire Properties Limited. It trades about -0.21 of its total potential returns per unit of risk. Swire Properties Limited is currently generating about 0.01 per unit of volatility. If you would invest  193.00  in Swire Properties Limited on January 20, 2024 and sell it today you would lose (1.00) from holding Swire Properties Limited or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Country Garden Services  vs.  Swire Properties Limited

Country Garden Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Country Garden Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Swire Properties

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Swire Properties is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Country Garden and Swire Properties

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

The idea behind Country Garden Services and Swire Properties Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.