Correlation Between National Development and Pegasus Hotels

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

Diversification Opportunities for National Development and Pegasus Hotels

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between National and Pegasus is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Development Bank and Pegasus Hotels of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasus Hotels and National Development 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 National Development Bank are associated (or correlated) with Pegasus Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasus Hotels has no effect on the direction of National Development i.e., National Development and Pegasus Hotels go up and down completely randomly.

Pair Corralation between National Development and Pegasus Hotels

Assuming the 90 days trading horizon National Development Bank is expected to under-perform the Pegasus Hotels. But the stock apears to be less risky and, when comparing its historical volatility, National Development Bank is 2.51 times less risky than Pegasus Hotels. The stock trades about -0.09 of its potential returns per unit of risk. The Pegasus Hotels of is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,010  in Pegasus Hotels of on August 30, 2024 and sell it today you would earn a total of  590.00  from holding Pegasus Hotels of or generate 19.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

National Development Bank  vs.  Pegasus Hotels of

 Performance 
       Timeline  
National Development Bank 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in National Development Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Development sustained solid returns over the last few months and may actually be approaching a breakup point.
Pegasus Hotels 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Pegasus Hotels of are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pegasus Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

National Development and Pegasus Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Development and Pegasus Hotels

The main advantage of trading using opposite National Development and Pegasus Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Development position performs unexpectedly, Pegasus Hotels 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 Pegasus Hotels will offset losses from the drop in Pegasus Hotels' long position.
The idea behind National Development Bank and Pegasus Hotels of 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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