Correlation Between PPHE HOTEL and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both PPHE HOTEL and STMICROELECTRONICS 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 PPHE HOTEL and STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPHE HOTEL GROUP and STMICROELECTRONICS, you can compare the effects of market volatilities on PPHE HOTEL and STMICROELECTRONICS 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 PPHE HOTEL with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPHE HOTEL and STMICROELECTRONICS.
Diversification Opportunities for PPHE HOTEL and STMICROELECTRONICS
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between PPHE and STMICROELECTRONICS is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PPHE HOTEL GROUP and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and PPHE 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 PPHE HOTEL GROUP are associated (or correlated) with STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of PPHE HOTEL i.e., PPHE HOTEL and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between PPHE HOTEL and STMICROELECTRONICS
Assuming the 90 days trading horizon PPHE HOTEL GROUP is expected to generate 0.63 times more return on investment than STMICROELECTRONICS. However, PPHE HOTEL GROUP is 1.57 times less risky than STMICROELECTRONICS. It trades about 0.1 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.11 per unit of risk. If you would invest 1,540 in PPHE HOTEL GROUP on November 20, 2024 and sell it today you would earn a total of 50.00 from holding PPHE HOTEL GROUP or generate 3.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
PPHE HOTEL GROUP vs. STMICROELECTRONICS
Performance |
Timeline |
PPHE HOTEL GROUP |
STMICROELECTRONICS |
PPHE HOTEL and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PPHE HOTEL and STMICROELECTRONICS
The main advantage of trading using opposite PPHE HOTEL and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPHE HOTEL position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.PPHE HOTEL vs. CHINA TELECOM H | ||
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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