Correlation Between Power Assets and Swire Pacific
Can any of the company-specific risk be diversified away by investing in both Power Assets and Swire Pacific 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 Power Assets and Swire Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Assets Holdings and Swire Pacific, you can compare the effects of market volatilities on Power Assets and Swire Pacific 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 Power Assets with a short position of Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Assets and Swire Pacific.
Diversification Opportunities for Power Assets and Swire Pacific
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and Swire is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings and Swire Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific and Power Assets 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 Power Assets Holdings are associated (or correlated) with Swire Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Pacific has no effect on the direction of Power Assets i.e., Power Assets and Swire Pacific go up and down completely randomly.
Pair Corralation between Power Assets and Swire Pacific
Assuming the 90 days horizon Power Assets Holdings is expected to generate 1.1 times more return on investment than Swire Pacific. However, Power Assets is 1.1 times more volatile than Swire Pacific. It trades about 0.04 of its potential returns per unit of risk. Swire Pacific is currently generating about 0.04 per unit of risk. If you would invest 467.00 in Power Assets Holdings on November 2, 2024 and sell it today you would earn a total of 178.00 from holding Power Assets Holdings or generate 38.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Assets Holdings vs. Swire Pacific
Performance |
| Timeline |
| Power Assets Holdings |
| Swire Pacific |
Power Assets and Swire Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Assets and Swire Pacific
The main advantage of trading using opposite Power Assets and Swire Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Assets position performs unexpectedly, Swire Pacific 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 Pacific will offset losses from the drop in Swire Pacific's long position.| Power Assets vs. TransAlta Corp | Power Assets vs. Pampa Energia SA | Power Assets vs. Vistra Energy Corp | Power Assets vs. NRG Energy |
| Swire Pacific vs. CK Hutchison Holdings | Swire Pacific vs. Marubeni | Swire Pacific vs. Sumitomo Corp ADR | Swire Pacific vs. Marubeni Corp ADR |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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