Correlation Between GENERAL and CapitaLand Investment

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Can any of the company-specific risk be diversified away by investing in both GENERAL 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 GENERAL and CapitaLand Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GENERAL ELEC CAP and CapitaLand Investment Limited, you can compare the effects of market volatilities on GENERAL 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 GENERAL with a short position of CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and CapitaLand Investment.

Diversification Opportunities for GENERAL and CapitaLand Investment

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between GENERAL and CapitaLand is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment and GENERAL 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 GENERAL ELEC CAP 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 GENERAL i.e., GENERAL and CapitaLand Investment go up and down completely randomly.

Pair Corralation between GENERAL and CapitaLand Investment

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to generate 0.66 times more return on investment than CapitaLand Investment. However, GENERAL ELEC CAP is 1.51 times less risky than CapitaLand Investment. It trades about -0.18 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  9,399  in GENERAL ELEC CAP on September 4, 2024 and sell it today you would lose (138.00) from holding GENERAL ELEC CAP or give up 1.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy30.0%
ValuesDaily Returns

GENERAL ELEC CAP  vs.  CapitaLand Investment Limited

 Performance 
       Timeline  
GENERAL ELEC CAP 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for GENERAL ELEC CAP investors.
CapitaLand Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GENERAL and CapitaLand Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GENERAL and CapitaLand Investment

The main advantage of trading using opposite GENERAL and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GENERAL 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.
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The idea behind GENERAL ELEC CAP and CapitaLand Investment Limited 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.
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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