Correlation Between First Hotel and Concord Securities
Can any of the company-specific risk be diversified away by investing in both First Hotel and Concord Securities 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 First Hotel and Concord Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Hotel Co and Concord Securities Co, you can compare the effects of market volatilities on First Hotel and Concord Securities 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 First Hotel with a short position of Concord Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hotel and Concord Securities.
Diversification Opportunities for First Hotel and Concord Securities
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Concord is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Concord Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concord Securities and First Hotel 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 First Hotel Co are associated (or correlated) with Concord Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concord Securities has no effect on the direction of First Hotel i.e., First Hotel and Concord Securities go up and down completely randomly.
Pair Corralation between First Hotel and Concord Securities
Assuming the 90 days trading horizon First Hotel is expected to generate 2.63 times less return on investment than Concord Securities. But when comparing it to its historical volatility, First Hotel Co is 1.26 times less risky than Concord Securities. It trades about 0.12 of its potential returns per unit of risk. Concord Securities Co is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,340 in Concord Securities Co on October 25, 2024 and sell it today you would earn a total of 75.00 from holding Concord Securities Co or generate 5.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Hotel Co vs. Concord Securities Co
Performance |
| Timeline |
| First Hotel |
| Concord Securities |
First Hotel and Concord Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Hotel and Concord Securities
The main advantage of trading using opposite First Hotel and Concord Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hotel position performs unexpectedly, Concord Securities 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 Concord Securities will offset losses from the drop in Concord Securities' long position.| First Hotel vs. Leofoo Development Co | First Hotel vs. Hotel Holiday Garden | First Hotel vs. Shin Shin Co | First Hotel vs. Hung Sheng Construction |
| Concord Securities vs. Jinan Acetate Chemical | Concord Securities vs. Phoenix Silicon International | Concord Securities vs. BRIM Biotechnology | Concord Securities vs. Grand Pacific Petrochemical |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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