Correlation Between Daito Trust and New World
Can any of the company-specific risk be diversified away by investing in both Daito Trust and New World 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 Daito Trust and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daito Trust Construction and New World Development, you can compare the effects of market volatilities on Daito Trust and New World 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 Daito Trust with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and New World.
Diversification Opportunities for Daito Trust and New World
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Daito and New is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development and Daito Trust 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 Daito Trust Construction are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Daito Trust i.e., Daito Trust and New World go up and down completely randomly.
Pair Corralation between Daito Trust and New World
Assuming the 90 days horizon Daito Trust is expected to generate 1.34 times less return on investment than New World. But when comparing it to its historical volatility, Daito Trust Construction is 3.03 times less risky than New World. It trades about 0.01 of its potential returns per unit of risk. New World Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 71.00 in New World Development on September 2, 2024 and sell it today you would lose (29.00) from holding New World Development or give up 40.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Daito Trust Construction vs. New World Development
Performance |
| Timeline |
| Daito Trust Construction |
| New World Development |
Daito Trust and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daito Trust and New World
The main advantage of trading using opposite Daito Trust and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.The idea behind Daito Trust Construction and New World Development 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.| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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