Correlation Between City Developments and Five Point
Can any of the company-specific risk be diversified away by investing in both City Developments and Five Point 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 City Developments and Five Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Developments Limited and Five Point Holdings, you can compare the effects of market volatilities on City Developments and Five Point 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 City Developments with a short position of Five Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and Five Point.
Diversification Opportunities for City Developments and Five Point
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between City and Five is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding City Developments Limited and Five Point Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Point Holdings and City Developments 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 City Developments Limited are associated (or correlated) with Five Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Point Holdings has no effect on the direction of City Developments i.e., City Developments and Five Point go up and down completely randomly.
Pair Corralation between City Developments and Five Point
Assuming the 90 days horizon City Developments Limited is expected to generate 0.15 times more return on investment than Five Point. However, City Developments Limited is 6.69 times less risky than Five Point. It trades about 0.31 of its potential returns per unit of risk. Five Point Holdings is currently generating about -0.23 per unit of risk. If you would invest 436.00 in City Developments Limited on January 24, 2024 and sell it today you would earn a total of 6.00 from holding City Developments Limited or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Developments Limited vs. Five Point Holdings
Performance |
| Timeline |
| City Developments |
| Five Point Holdings |
City Developments and Five Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Developments and Five Point
The main advantage of trading using opposite City Developments and Five Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments position performs unexpectedly, Five Point 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 Five Point will offset losses from the drop in Five Point's long position.The idea behind City Developments Limited and Five Point Holdings 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.| Five Point vs. BRT Realty Trust | Five Point vs. Nexpoint Residential Trust | Five Point vs. Veris Residential | Five Point vs. Apartment Income REIT |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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