Correlation Between New World and PCCW
Can any of the company-specific risk be diversified away by investing in both New World and PCCW 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 PCCW 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 PCCW Limited, you can compare the effects of market volatilities on New World and PCCW 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 PCCW. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and PCCW.
Diversification Opportunities for New World and PCCW
Significant diversification
The 3 months correlation between New and PCCW is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and PCCW Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCCW Limited 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 PCCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCCW Limited has no effect on the direction of New World i.e., New World and PCCW go up and down completely randomly.
Pair Corralation between New World and PCCW
Assuming the 90 days horizon New World is expected to generate 1.48 times less return on investment than PCCW. In addition to that, New World is 1.97 times more volatile than PCCW Limited. It trades about 0.01 of its total potential returns per unit of risk. PCCW Limited is currently generating about 0.04 per unit of volatility. If you would invest 47.00 in PCCW Limited on September 5, 2024 and sell it today you would earn a total of 5.00 from holding PCCW Limited or generate 10.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Development vs. PCCW Limited
Performance |
| Timeline |
| New World Development |
| PCCW Limited |
New World and PCCW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and PCCW
The main advantage of trading using opposite New World and PCCW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, PCCW 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 PCCW will offset losses from the drop in PCCW'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 |
| PCCW vs. Telenor ASA ADR | PCCW vs. Hellenic Telecommunications Org | PCCW vs. Orange SA ADR | PCCW vs. Telefonica SA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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