Correlation Between New World and Daito Trust
Can any of the company-specific risk be diversified away by investing in both New World and Daito Trust 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 New World and Daito Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Development and Daito Trust Construction, you can compare the effects of market volatilities on New World and Daito Trust 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 New World with a short position of Daito Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Daito Trust.
Diversification Opportunities for New World and Daito Trust
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and Daito is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Daito Trust Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daito Trust Construction and New World 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 New World Development are associated (or correlated) with Daito Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daito Trust Construction has no effect on the direction of New World i.e., New World and Daito Trust go up and down completely randomly.
Pair Corralation between New World and Daito Trust
Assuming the 90 days horizon New World Development is expected to generate 3.03 times more return on investment than Daito Trust. However, New World is 3.03 times more volatile than Daito Trust Construction. It trades about 0.01 of its potential returns per unit of risk. Daito Trust Construction is currently generating about 0.01 per unit of risk. 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 |
New World Development vs. Daito Trust Construction
Performance |
| Timeline |
| New World Development |
| Daito Trust Construction |
New World and Daito Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Daito Trust
The main advantage of trading using opposite New World and Daito Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Daito Trust 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 Daito Trust will offset losses from the drop in Daito Trust's long position.| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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