Correlation Between Vonovia SE and Swire Properties
Can any of the company-specific risk be diversified away by investing in both Vonovia SE and Swire Properties 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 Vonovia SE and Swire Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vonovia SE and Swire Properties Limited, you can compare the effects of market volatilities on Vonovia SE and Swire Properties 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 Vonovia SE with a short position of Swire Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vonovia SE and Swire Properties.
Diversification Opportunities for Vonovia SE and Swire Properties
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vonovia and Swire is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vonovia SE and Swire Properties Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Properties and Vonovia SE 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 Vonovia SE are associated (or correlated) with Swire Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Properties has no effect on the direction of Vonovia SE i.e., Vonovia SE and Swire Properties go up and down completely randomly.
Pair Corralation between Vonovia SE and Swire Properties
Assuming the 90 days horizon Vonovia SE is expected to generate 0.98 times more return on investment than Swire Properties. However, Vonovia SE is 1.02 times less risky than Swire Properties. It trades about -0.07 of its potential returns per unit of risk. Swire Properties Limited is currently generating about -0.07 per unit of risk. If you would invest 3,109 in Vonovia SE on August 29, 2024 and sell it today you would lose (80.00) from holding Vonovia SE or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vonovia SE vs. Swire Properties Limited
Performance |
| Timeline |
| Vonovia SE |
| Swire Properties |
Vonovia SE and Swire Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vonovia SE and Swire Properties
The main advantage of trading using opposite Vonovia SE and Swire Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vonovia SE position performs unexpectedly, Swire Properties 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 Properties will offset losses from the drop in Swire Properties' long position.The idea behind Vonovia SE and Swire Properties 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.| Swire Properties vs. CVS Health | Swire Properties vs. Southwest Airlines Co | Swire Properties vs. Bausch Health Companies | Swire Properties vs. JAPAN AIRLINES |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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