Correlation Between BTS Group and Royal Orchid

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Can any of the company-specific risk be diversified away by investing in both BTS Group and Royal Orchid 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 BTS Group and Royal Orchid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BTS Group Holdings and Royal Orchid Hotel, you can compare the effects of market volatilities on BTS Group and Royal Orchid 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 BTS Group with a short position of Royal Orchid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTS Group and Royal Orchid.

Diversification Opportunities for BTS Group and Royal Orchid

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between BTS and Royal is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BTS Group Holdings and Royal Orchid Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Orchid Hotel and BTS Group 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 BTS Group Holdings are associated (or correlated) with Royal Orchid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Orchid Hotel has no effect on the direction of BTS Group i.e., BTS Group and Royal Orchid go up and down completely randomly.

Pair Corralation between BTS Group and Royal Orchid

Assuming the 90 days trading horizon BTS Group is expected to generate 40.75 times less return on investment than Royal Orchid. But when comparing it to its historical volatility, BTS Group Holdings is 39.57 times less risky than Royal Orchid. It trades about 0.08 of its potential returns per unit of risk. Royal Orchid Hotel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Royal Orchid Hotel on August 31, 2024 and sell it today you would lose (30.00) from holding Royal Orchid Hotel or give up 12.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

BTS Group Holdings  vs.  Royal Orchid Hotel

 Performance 
       Timeline  
BTS Group Holdings 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BTS Group Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, BTS Group disclosed solid returns over the last few months and may actually be approaching a breakup point.
Royal Orchid Hotel 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical indicators, Royal Orchid disclosed solid returns over the last few months and may actually be approaching a breakup point.

BTS Group and Royal Orchid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BTS Group and Royal Orchid

The main advantage of trading using opposite BTS Group and Royal Orchid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTS Group position performs unexpectedly, Royal Orchid 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 Royal Orchid will offset losses from the drop in Royal Orchid's long position.
The idea behind BTS Group Holdings and Royal Orchid 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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