Correlation Between Hotel Holiday and Formosa International
Can any of the company-specific risk be diversified away by investing in both Hotel Holiday and Formosa International 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 Hotel Holiday and Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hotel Holiday Garden and Formosa International Hotels, you can compare the effects of market volatilities on Hotel Holiday and Formosa International 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 Hotel Holiday with a short position of Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotel Holiday and Formosa International.
Diversification Opportunities for Hotel Holiday and Formosa International
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hotel and Formosa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Holiday Garden and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International and Hotel Holiday 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 Hotel Holiday Garden are associated (or correlated) with Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of Hotel Holiday i.e., Hotel Holiday and Formosa International go up and down completely randomly.
Pair Corralation between Hotel Holiday and Formosa International
Assuming the 90 days trading horizon Hotel Holiday Garden is expected to generate 1.26 times more return on investment than Formosa International. However, Hotel Holiday is 1.26 times more volatile than Formosa International Hotels. It trades about 0.16 of its potential returns per unit of risk. Formosa International Hotels is currently generating about 0.12 per unit of risk. If you would invest 1,630 in Hotel Holiday Garden on November 5, 2024 and sell it today you would earn a total of 80.00 from holding Hotel Holiday Garden or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hotel Holiday Garden vs. Formosa International Hotels
Performance |
| Timeline |
| Hotel Holiday Garden |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Formosa International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Hotel Holiday and Formosa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotel Holiday and Formosa International
The main advantage of trading using opposite Hotel Holiday and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotel Holiday position performs unexpectedly, Formosa International 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 Formosa International will offset losses from the drop in Formosa International's long position.The idea behind Hotel Holiday Garden and Formosa International Hotels 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |