Correlation Between Huazhu and Fanhua
Can any of the company-specific risk be diversified away by investing in both Huazhu and Fanhua 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 Huazhu and Fanhua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huazhu Group and Fanhua Inc, you can compare the effects of market volatilities on Huazhu and Fanhua 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 Huazhu with a short position of Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huazhu and Fanhua.
Diversification Opportunities for Huazhu and Fanhua
Very good diversification
The 3 months correlation between Huazhu and Fanhua is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Huazhu Group and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Huazhu 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 Huazhu Group are associated (or correlated) with Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Huazhu i.e., Huazhu and Fanhua go up and down completely randomly.
Pair Corralation between Huazhu and Fanhua
Given the investment horizon of 90 days Huazhu Group is expected to generate 0.6 times more return on investment than Fanhua. However, Huazhu Group is 1.66 times less risky than Fanhua. It trades about -0.01 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.08 per unit of risk. If you would invest 4,160 in Huazhu Group on August 31, 2024 and sell it today you would lose (943.00) from holding Huazhu Group or give up 22.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.05% |
| Values | Daily Returns |
Huazhu Group vs. Fanhua Inc
Performance |
| Timeline |
| Huazhu Group |
| Fanhua Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Huazhu and Fanhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huazhu and Fanhua
The main advantage of trading using opposite Huazhu and Fanhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huazhu position performs unexpectedly, Fanhua 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 Fanhua will offset losses from the drop in Fanhua's long position.| Huazhu vs. GreenTree Hospitality Group | Huazhu vs. Soho House Co | Huazhu vs. InterContinental Hotels Group | Huazhu vs. The Intergroup |
| Fanhua vs. Erie Indemnity | Fanhua vs. Crawford Company | Fanhua vs. Crawford Company | Fanhua vs. CorVel Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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