Correlation Between First Hotel and Alar Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both First Hotel and Alar Pharmaceuticals 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 Alar Pharmaceuticals 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 Alar Pharmaceuticals, you can compare the effects of market volatilities on First Hotel and Alar Pharmaceuticals 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 Alar Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hotel and Alar Pharmaceuticals.
Diversification Opportunities for First Hotel and Alar Pharmaceuticals
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Alar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Alar Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alar Pharmaceuticals 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 Alar Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alar Pharmaceuticals has no effect on the direction of First Hotel i.e., First Hotel and Alar Pharmaceuticals go up and down completely randomly.
Pair Corralation between First Hotel and Alar Pharmaceuticals
Assuming the 90 days trading horizon First Hotel Co is expected to generate 0.33 times more return on investment than Alar Pharmaceuticals. However, First Hotel Co is 3.03 times less risky than Alar Pharmaceuticals. It trades about 0.09 of its potential returns per unit of risk. Alar Pharmaceuticals is currently generating about -0.2 per unit of risk. If you would invest 1,450 in First Hotel Co on October 22, 2024 and sell it today you would earn a total of 20.00 from holding First Hotel Co or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Hotel Co vs. Alar Pharmaceuticals
Performance |
| Timeline |
| First Hotel |
| Alar Pharmaceuticals |
First Hotel and Alar Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Hotel and Alar Pharmaceuticals
The main advantage of trading using opposite First Hotel and Alar Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hotel position performs unexpectedly, Alar Pharmaceuticals 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 Alar Pharmaceuticals will offset losses from the drop in Alar Pharmaceuticals' 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 |
| Alar Pharmaceuticals vs. Ocean Plastics Co | Alar Pharmaceuticals vs. China Metal Products | Alar Pharmaceuticals vs. Elite Material Co | Alar Pharmaceuticals vs. Excelsior Medical 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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