Correlation Between Sporton International and Hotel Holiday
Can any of the company-specific risk be diversified away by investing in both Sporton International and Hotel Holiday 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 Sporton International and Hotel Holiday into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sporton International and Hotel Holiday Garden, you can compare the effects of market volatilities on Sporton International and Hotel Holiday 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 Sporton International with a short position of Hotel Holiday. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sporton International and Hotel Holiday.
Diversification Opportunities for Sporton International and Hotel Holiday
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sporton and Hotel is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sporton International and Hotel Holiday Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Holiday Garden and Sporton International 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 Sporton International are associated (or correlated) with Hotel Holiday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Holiday Garden has no effect on the direction of Sporton International i.e., Sporton International and Hotel Holiday go up and down completely randomly.
Pair Corralation between Sporton International and Hotel Holiday
Assuming the 90 days trading horizon Sporton International is expected to generate 1.25 times more return on investment than Hotel Holiday. However, Sporton International is 1.25 times more volatile than Hotel Holiday Garden. It trades about -0.01 of its potential returns per unit of risk. Hotel Holiday Garden is currently generating about -0.07 per unit of risk. If you would invest 22,483 in Sporton International on September 2, 2024 and sell it today you would lose (2,133) from holding Sporton International or give up 9.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sporton International vs. Hotel Holiday Garden
Performance |
| Timeline |
| Sporton International |
| Hotel Holiday Garden |
Sporton International and Hotel Holiday Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sporton International and Hotel Holiday
The main advantage of trading using opposite Sporton International and Hotel Holiday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sporton International position performs unexpectedly, Hotel Holiday 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 Hotel Holiday will offset losses from the drop in Hotel Holiday's long position.| Sporton International vs. Hunya Foods Co | Sporton International vs. Microtips Technology | Sporton International vs. Intai Technology | Sporton International vs. Univacco Technology |
| Hotel Holiday vs. First Hotel Co | Hotel Holiday vs. Leofoo Development Co | Hotel Holiday vs. Taiwan Tea Corp | Hotel Holiday vs. China Container Terminal |
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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