Correlation Between Tai Tung and First Hotel
Can any of the company-specific risk be diversified away by investing in both Tai Tung and First 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 Tai Tung and First Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tai Tung Communication and First Hotel Co, you can compare the effects of market volatilities on Tai Tung and First 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 Tai Tung with a short position of First Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and First Hotel.
Diversification Opportunities for Tai Tung and First Hotel
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tai and First is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel and Tai Tung 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 Tai Tung Communication are associated (or correlated) with First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of Tai Tung i.e., Tai Tung and First Hotel go up and down completely randomly.
Pair Corralation between Tai Tung and First Hotel
Assuming the 90 days trading horizon Tai Tung Communication is expected to generate 2.87 times more return on investment than First Hotel. However, Tai Tung is 2.87 times more volatile than First Hotel Co. It trades about 0.05 of its potential returns per unit of risk. First Hotel Co is currently generating about -0.06 per unit of risk. If you would invest 1,875 in Tai Tung Communication on August 31, 2024 and sell it today you would earn a total of 775.00 from holding Tai Tung Communication or generate 41.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Tai Tung Communication vs. First Hotel Co
Performance |
| Timeline |
| Tai Tung Communication |
| First Hotel |
Tai Tung and First Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and First Hotel
The main advantage of trading using opposite Tai Tung and First Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung position performs unexpectedly, First 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 First Hotel will offset losses from the drop in First Hotel's long position.The idea behind Tai Tung Communication and First 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.| First Hotel vs. Leofoo Development Co | First Hotel vs. Hotel Holiday Garden | First Hotel vs. Shin Shin Co | First Hotel vs. Hung Sheng Construction |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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