Correlation Between Shangri La and TRC Construction
Can any of the company-specific risk be diversified away by investing in both Shangri La and TRC Construction 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 Shangri La and TRC Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shangri La Hotel Public and TRC Construction Public, you can compare the effects of market volatilities on Shangri La and TRC Construction 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 Shangri La with a short position of TRC Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shangri La and TRC Construction.
Diversification Opportunities for Shangri La and TRC Construction
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Shangri and TRC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shangri La Hotel Public and TRC Construction Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRC Construction Public and Shangri La 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 Shangri La Hotel Public are associated (or correlated) with TRC Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRC Construction Public has no effect on the direction of Shangri La i.e., Shangri La and TRC Construction go up and down completely randomly.
Pair Corralation between Shangri La and TRC Construction
Assuming the 90 days trading horizon Shangri La Hotel Public is expected to generate 14.34 times more return on investment than TRC Construction. However, Shangri La is 14.34 times more volatile than TRC Construction Public. It trades about 0.1 of its potential returns per unit of risk. TRC Construction Public is currently generating about -0.04 per unit of risk. If you would invest 4,799 in Shangri La Hotel Public on September 3, 2024 and sell it today you would earn a total of 101.00 from holding Shangri La Hotel Public or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.37% |
| Values | Daily Returns |
Shangri La Hotel Public vs. TRC Construction Public
Performance |
| Timeline |
| Shangri La Hotel |
| TRC Construction Public |
Shangri La and TRC Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shangri La and TRC Construction
The main advantage of trading using opposite Shangri La and TRC Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shangri La position performs unexpectedly, TRC Construction 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 TRC Construction will offset losses from the drop in TRC Construction's long position.| Shangri La vs. Central Pattana Public | Shangri La vs. CP ALL Public | Shangri La vs. Bangkok Dusit Medical | Shangri La vs. Airports of Thailand |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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