Correlation Between Leatec Fine and FarGlory Hotel
Can any of the company-specific risk be diversified away by investing in both Leatec Fine 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 Leatec Fine and FarGlory Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leatec Fine Ceramics and FarGlory Hotel Co, you can compare the effects of market volatilities on Leatec Fine 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 Leatec Fine with a short position of FarGlory Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leatec Fine and FarGlory Hotel.
Diversification Opportunities for Leatec Fine and FarGlory Hotel
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Leatec and FarGlory is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Leatec Fine Ceramics and FarGlory Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarGlory Hotel and Leatec Fine 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 Leatec Fine Ceramics 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 Leatec Fine i.e., Leatec Fine and FarGlory Hotel go up and down completely randomly.
Pair Corralation between Leatec Fine and FarGlory Hotel
Assuming the 90 days trading horizon Leatec Fine Ceramics is expected to under-perform the FarGlory Hotel. In addition to that, Leatec Fine is 1.54 times more volatile than FarGlory Hotel Co. It trades about -0.04 of its total potential returns per unit of risk. FarGlory Hotel Co is currently generating about -0.03 per unit of volatility. If you would invest 2,620 in FarGlory Hotel Co on November 6, 2024 and sell it today you would lose (110.00) from holding FarGlory Hotel Co or give up 4.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.25% |
| Values | Daily Returns |
Leatec Fine Ceramics vs. FarGlory Hotel Co
Performance |
| Timeline |
| Leatec Fine Ceramics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| FarGlory Hotel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Leatec Fine and FarGlory Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leatec Fine and FarGlory Hotel
The main advantage of trading using opposite Leatec Fine and FarGlory Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leatec Fine 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.The idea behind Leatec Fine Ceramics and FarGlory Hotel Co 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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