Correlation Between Dalata Hotel and China Merchants
Can any of the company-specific risk be diversified away by investing in both Dalata Hotel and China Merchants 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 Dalata Hotel and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dalata Hotel Group and China Merchants Bank, you can compare the effects of market volatilities on Dalata Hotel and China Merchants 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 Dalata Hotel with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalata Hotel and China Merchants.
Diversification Opportunities for Dalata Hotel and China Merchants
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dalata and China is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dalata Hotel Group and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank and Dalata Hotel 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 Dalata Hotel Group are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Dalata Hotel i.e., Dalata Hotel and China Merchants go up and down completely randomly.
Pair Corralation between Dalata Hotel and China Merchants
Assuming the 90 days horizon Dalata Hotel Group is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, Dalata Hotel Group is 1.14 times less risky than China Merchants. The stock trades about -0.03 of its potential returns per unit of risk. The China Merchants Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 467.00 in China Merchants Bank on September 14, 2024 and sell it today you would earn a total of 15.00 from holding China Merchants Bank or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dalata Hotel Group vs. China Merchants Bank
Performance |
| Timeline |
| Dalata Hotel Group |
| China Merchants Bank |
Dalata Hotel and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dalata Hotel and China Merchants
The main advantage of trading using opposite Dalata Hotel and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dalata Hotel position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| Dalata Hotel vs. Hyatt Hotels | Dalata Hotel vs. InterContinental Hotels Group | Dalata Hotel vs. INTERCONT HOTELS | Dalata Hotel vs. Wyndham Hotels Resorts |
| China Merchants vs. HDFC Bank Limited | China Merchants vs. ICICI Bank Limited | China Merchants vs. PT Bank Central | China Merchants vs. DBS Group Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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