Correlation Between Chinese Maritime and FarGlory Hotel
Can any of the company-specific risk be diversified away by investing in both Chinese Maritime and FarGlory Hotel 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 Chinese Maritime and FarGlory Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chinese Maritime Transport and FarGlory Hotel Co, you can compare the effects of market volatilities on Chinese Maritime and FarGlory Hotel 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 Chinese Maritime with a short position of FarGlory Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Maritime and FarGlory Hotel.
Diversification Opportunities for Chinese Maritime and FarGlory Hotel
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chinese and FarGlory is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Maritime Transport and FarGlory Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarGlory Hotel and Chinese Maritime 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 Chinese Maritime Transport are associated (or correlated) with FarGlory Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FarGlory Hotel has no effect on the direction of Chinese Maritime i.e., Chinese Maritime and FarGlory Hotel go up and down completely randomly.
Pair Corralation between Chinese Maritime and FarGlory Hotel
Assuming the 90 days trading horizon Chinese Maritime Transport is expected to generate 0.55 times more return on investment than FarGlory Hotel. However, Chinese Maritime Transport is 1.82 times less risky than FarGlory Hotel. It trades about -0.28 of its potential returns per unit of risk. FarGlory Hotel Co is currently generating about -0.2 per unit of risk. If you would invest 4,100 in Chinese Maritime Transport on November 6, 2024 and sell it today you would lose (215.00) from holding Chinese Maritime Transport or give up 5.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chinese Maritime Transport vs. FarGlory Hotel Co
Performance |
| Timeline |
| Chinese Maritime Tra |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| FarGlory Hotel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Chinese Maritime and FarGlory Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chinese Maritime and FarGlory Hotel
The main advantage of trading using opposite Chinese Maritime and FarGlory Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chinese Maritime position performs unexpectedly, FarGlory Hotel 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 FarGlory Hotel will offset losses from the drop in FarGlory Hotel's long position.The idea behind Chinese Maritime Transport and FarGlory Hotel Co 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.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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