Correlation Between City Developments and Holiday Island
Can any of the company-specific risk be diversified away by investing in both City Developments and Holiday Island 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 Holiday Island 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 Holiday Island Holdings, you can compare the effects of market volatilities on City Developments and Holiday Island 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 Holiday Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and Holiday Island.
Diversification Opportunities for City Developments and Holiday Island
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between City and Holiday is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding City Developments Limited and Holiday Island Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Island 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 Holiday Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Island Holdings has no effect on the direction of City Developments i.e., City Developments and Holiday Island go up and down completely randomly.
Pair Corralation between City Developments and Holiday Island
Assuming the 90 days horizon City Developments is expected to generate 3681.67 times less return on investment than Holiday Island. But when comparing it to its historical volatility, City Developments Limited is 62.93 times less risky than Holiday Island. It trades about 0.0 of its potential returns per unit of risk. Holiday Island Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2.80 in Holiday Island Holdings on February 22, 2024 and sell it today you would earn a total of 0.15 from holding Holiday Island Holdings or generate 5.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 90.91% |
Values | Daily Returns |
City Developments Limited vs. Holiday Island Holdings
Performance |
Timeline |
City Developments |
Holiday Island Holdings |
City Developments and Holiday Island Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Developments and Holiday Island
The main advantage of trading using opposite City Developments and Holiday Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments position performs unexpectedly, Holiday Island 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 Holiday Island will offset losses from the drop in Holiday Island's long position.City Developments vs. Sino Land Co | City Developments vs. Holiday Island Holdings | City Developments vs. China Overseas Land | City Developments vs. Pfizer Inc |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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