Correlation Between Lion Travel and FarGlory Hotel
Can any of the company-specific risk be diversified away by investing in both Lion Travel 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 Lion Travel and FarGlory Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Travel Service and FarGlory Hotel Co, you can compare the effects of market volatilities on Lion Travel 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 Lion Travel with a short position of FarGlory Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Travel and FarGlory Hotel.
Diversification Opportunities for Lion Travel and FarGlory Hotel
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lion and FarGlory is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lion Travel Service and FarGlory Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarGlory Hotel and Lion Travel 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 Lion Travel Service 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 Lion Travel i.e., Lion Travel and FarGlory Hotel go up and down completely randomly.
Pair Corralation between Lion Travel and FarGlory Hotel
Assuming the 90 days trading horizon Lion Travel Service is expected to generate 1.49 times more return on investment than FarGlory Hotel. However, Lion Travel is 1.49 times more volatile than FarGlory Hotel Co. It trades about -0.01 of its potential returns per unit of risk. FarGlory Hotel Co is currently generating about -0.07 per unit of risk. If you would invest 13,700 in Lion Travel Service on September 1, 2024 and sell it today you would lose (1,550) from holding Lion Travel Service or give up 11.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Travel Service vs. FarGlory Hotel Co
Performance |
| Timeline |
| Lion Travel Service |
| FarGlory Hotel |
Lion Travel and FarGlory Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Travel and FarGlory Hotel
The main advantage of trading using opposite Lion Travel and FarGlory Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Travel 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.| Lion Travel vs. Eva Airways Corp | Lion Travel vs. Formosa International Hotels | Lion Travel vs. China Airlines | Lion Travel vs. Uni President Enterprises Corp |
| FarGlory Hotel vs. Ambassador Hotel | FarGlory Hotel vs. Lion Travel Service | FarGlory Hotel vs. Chateau International Development | FarGlory Hotel vs. First Hotel 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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