Correlation Between DIVERSIFIED ROYALTY and CapitaLand Investment
Can any of the company-specific risk be diversified away by investing in both DIVERSIFIED ROYALTY and CapitaLand Investment 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 DIVERSIFIED ROYALTY and CapitaLand Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIVERSIFIED ROYALTY and CapitaLand Investment Limited, you can compare the effects of market volatilities on DIVERSIFIED ROYALTY and CapitaLand Investment 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 DIVERSIFIED ROYALTY with a short position of CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIVERSIFIED ROYALTY and CapitaLand Investment.
Diversification Opportunities for DIVERSIFIED ROYALTY and CapitaLand Investment
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between DIVERSIFIED and CapitaLand is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding DIVERSIFIED ROYALTY and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment and DIVERSIFIED ROYALTY 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 DIVERSIFIED ROYALTY are associated (or correlated) with CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of DIVERSIFIED ROYALTY i.e., DIVERSIFIED ROYALTY and CapitaLand Investment go up and down completely randomly.
Pair Corralation between DIVERSIFIED ROYALTY and CapitaLand Investment
Assuming the 90 days horizon DIVERSIFIED ROYALTY is expected to generate 2.27 times more return on investment than CapitaLand Investment. However, DIVERSIFIED ROYALTY is 2.27 times more volatile than CapitaLand Investment Limited. It trades about -0.03 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.22 per unit of risk. If you would invest 207.00 in DIVERSIFIED ROYALTY on September 13, 2024 and sell it today you would lose (9.00) from holding DIVERSIFIED ROYALTY or give up 4.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DIVERSIFIED ROYALTY vs. CapitaLand Investment Limited
Performance |
| Timeline |
| DIVERSIFIED ROYALTY |
| CapitaLand Investment |
DIVERSIFIED ROYALTY and CapitaLand Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIVERSIFIED ROYALTY and CapitaLand Investment
The main advantage of trading using opposite DIVERSIFIED ROYALTY and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIVERSIFIED ROYALTY position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment's long position.| DIVERSIFIED ROYALTY vs. Federal Home Loan | DIVERSIFIED ROYALTY vs. Superior Plus Corp | DIVERSIFIED ROYALTY vs. SIVERS SEMICONDUCTORS AB | DIVERSIFIED ROYALTY vs. Norsk Hydro ASA |
| CapitaLand Investment vs. Superior Plus Corp | CapitaLand Investment vs. SIVERS SEMICONDUCTORS AB | CapitaLand Investment vs. Reliance Steel Aluminum | CapitaLand Investment vs. CHINA HUARONG ENERHD 50 |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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