Correlation Between Retail Estates and CHINA DISPLAY

Can any of the company-specific risk be diversified away by investing in both Retail Estates and CHINA DISPLAY 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 Retail Estates and CHINA DISPLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Retail Estates NV and CHINA DISPLAY OTHHD 10, you can compare the effects of market volatilities on Retail Estates and CHINA DISPLAY 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 Retail Estates with a short position of CHINA DISPLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and CHINA DISPLAY.

Diversification Opportunities for Retail Estates and CHINA DISPLAY

0.57

Correlation Coefficient

Retail Estates  CHINA DISPLAY

Very weak diversification

The 3 months correlation between Retail and CHINA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and CHINA DISPLAY OTHHD 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA DISPLAY OTHHD and Retail Estates 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 Retail Estates NV are associated (or correlated) with CHINA DISPLAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA DISPLAY OTHHD has no effect on the direction of Retail Estates i.e., Retail Estates and CHINA DISPLAY go up and down completely randomly.

Pair Corralation between Retail Estates and CHINA DISPLAY

Assuming the 90 days horizon Retail Estates is expected to generate 4.74 times less return on investment than CHINA DISPLAY. But when comparing it to its historical volatility, Retail Estates NV is 4.93 times less risky than CHINA DISPLAY. It trades about 0.2 of its potential returns per unit of risk. CHINA DISPLAY OTHHD 10 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1.75  in CHINA DISPLAY OTHHD 10 on April 25, 2025 and sell it today you would earn a total of  1.20  from holding CHINA DISPLAY OTHHD 10 or generate 68.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Retail Estates NV  vs.  CHINA DISPLAY OTHHD 10

Retail Estates NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Estates NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Retail Estates reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA DISPLAY OTHHD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA DISPLAY OTHHD 10 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, CHINA DISPLAY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retail Estates and CHINA DISPLAY

The main advantage of trading using opposite Retail Estates and CHINA DISPLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates position performs unexpectedly, CHINA DISPLAY 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 CHINA DISPLAY will offset losses from the drop in CHINA DISPLAY's long position.

The idea behind Retail Estates NV and CHINA DISPLAY OTHHD 10 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.