Correlation Between CHC Healthcare and HOYA Resort
Can any of the company-specific risk be diversified away by investing in both CHC Healthcare and HOYA Resort 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 CHC Healthcare and HOYA Resort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHC Healthcare Group and HOYA Resort Hotel, you can compare the effects of market volatilities on CHC Healthcare and HOYA Resort 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 CHC Healthcare with a short position of HOYA Resort. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Healthcare and HOYA Resort.
Diversification Opportunities for CHC Healthcare and HOYA Resort
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHC and HOYA is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CHC Healthcare Group and HOYA Resort Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOYA Resort Hotel and CHC Healthcare 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 CHC Healthcare Group are associated (or correlated) with HOYA Resort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOYA Resort Hotel has no effect on the direction of CHC Healthcare i.e., CHC Healthcare and HOYA Resort go up and down completely randomly.
Pair Corralation between CHC Healthcare and HOYA Resort
Assuming the 90 days trading horizon CHC Healthcare is expected to generate 1.9 times less return on investment than HOYA Resort. But when comparing it to its historical volatility, CHC Healthcare Group is 3.6 times less risky than HOYA Resort. It trades about 0.16 of its potential returns per unit of risk. HOYA Resort Hotel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,120 in HOYA Resort Hotel on November 6, 2024 and sell it today you would earn a total of 85.00 from holding HOYA Resort Hotel or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHC Healthcare Group vs. HOYA Resort Hotel
Performance |
| Timeline |
| CHC Healthcare Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| HOYA Resort Hotel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
CHC Healthcare and HOYA Resort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHC Healthcare and HOYA Resort
The main advantage of trading using opposite CHC Healthcare and HOYA Resort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHC Healthcare position performs unexpectedly, HOYA Resort 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 HOYA Resort will offset losses from the drop in HOYA Resort's long position.The idea behind CHC Healthcare Group and HOYA Resort Hotel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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