Correlation Between First Hotel and Trade Van
Can any of the company-specific risk be diversified away by investing in both First Hotel and Trade Van 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 Trade Van 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 Trade Van Information Services, you can compare the effects of market volatilities on First Hotel and Trade Van 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 Trade Van. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hotel and Trade Van.
Diversification Opportunities for First Hotel and Trade Van
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Trade is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Trade Van Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Van Information 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 Trade Van. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Van Information has no effect on the direction of First Hotel i.e., First Hotel and Trade Van go up and down completely randomly.
Pair Corralation between First Hotel and Trade Van
Assuming the 90 days trading horizon First Hotel is expected to generate 4.78 times less return on investment than Trade Van. But when comparing it to its historical volatility, First Hotel Co is 8.76 times less risky than Trade Van. It trades about 0.06 of its potential returns per unit of risk. Trade Van Information Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,410 in Trade Van Information Services on November 28, 2024 and sell it today you would earn a total of 80.00 from holding Trade Van Information Services or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Hotel Co vs. Trade Van Information Services
Performance |
| Timeline |
| First Hotel |
| Trade Van Information |
First Hotel and Trade Van Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Hotel and Trade Van
The main advantage of trading using opposite First Hotel and Trade Van positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hotel position performs unexpectedly, Trade Van 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 Trade Van will offset losses from the drop in Trade Van's 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 |
| Trade Van vs. Taiwan Sakura Corp | Trade Van vs. Charoen Pokphand Enterprise | Trade Van vs. Taiwan Cogeneration Corp | Trade Van vs. Taiwan Secom Co |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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