Correlation Between Auto Trader and PPHE Hotel
Can any of the company-specific risk be diversified away by investing in both Auto Trader and PPHE 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 Auto Trader and PPHE Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and PPHE Hotel Group, you can compare the effects of market volatilities on Auto Trader and PPHE 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 Auto Trader with a short position of PPHE Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and PPHE Hotel.
Diversification Opportunities for Auto Trader and PPHE Hotel
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Auto and PPHE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group and Auto Trader 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 Auto Trader Group are associated (or correlated) with PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of Auto Trader i.e., Auto Trader and PPHE Hotel go up and down completely randomly.
Pair Corralation between Auto Trader and PPHE Hotel
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.52 times more return on investment than PPHE Hotel. However, Auto Trader Group is 1.91 times less risky than PPHE Hotel. It trades about -0.02 of its potential returns per unit of risk. PPHE Hotel Group is currently generating about -0.22 per unit of risk. If you would invest 78,074 in Auto Trader Group on October 24, 2024 and sell it today you would lose (454.00) from holding Auto Trader Group or give up 0.58% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Auto Trader Group vs. PPHE Hotel Group
Performance |
Timeline |
Auto Trader Group |
PPHE Hotel Group |
Auto Trader and PPHE Hotel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Auto Trader and PPHE Hotel
The main advantage of trading using opposite Auto Trader and PPHE Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, PPHE 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 PPHE Hotel will offset losses from the drop in PPHE Hotel's long position.Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Toyota Motor Corp | Auto Trader vs. Reliance Industries Ltd |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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