Correlation Between Huatian Hotel and Sichuan Swellfun

Can any of the company-specific risk be diversified away by investing in both Huatian Hotel and Sichuan Swellfun 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 Huatian Hotel and Sichuan Swellfun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huatian Hotel Group and Sichuan Swellfun Co, you can compare the effects of market volatilities on Huatian Hotel and Sichuan Swellfun 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 Huatian Hotel with a short position of Sichuan Swellfun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huatian Hotel and Sichuan Swellfun.

Diversification Opportunities for Huatian Hotel and Sichuan Swellfun

0.65

Correlation Coefficient

Huatian Hotel  Sichuan Swellfun

Poor diversification

The 3 months correlation between Huatian and Sichuan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Huatian Hotel Group and Sichuan Swellfun Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Swellfun and Huatian 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 Huatian Hotel Group are associated (or correlated) with Sichuan Swellfun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Swellfun has no effect on the direction of Huatian Hotel i.e., Huatian Hotel and Sichuan Swellfun go up and down completely randomly.

Pair Corralation between Huatian Hotel and Sichuan Swellfun

Assuming the 90 days trading horizon Huatian Hotel Group is expected to under-perform the Sichuan Swellfun. But the stock apears to be less risky and, when comparing its historical volatility, Huatian Hotel Group is 1.12 times less risky than Sichuan Swellfun. The stock trades about -0.05 of its potential returns per unit of risk. The Sichuan Swellfun Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,293  in Sichuan Swellfun Co on October 26, 2024 and sell it today you would earn a total of  406.00  from holding Sichuan Swellfun Co or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Huatian Hotel Group  vs.  Sichuan Swellfun Co

Huatian Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huatian Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sichuan Swellfun

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Swellfun Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Swellfun may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Huatian Hotel and Sichuan Swellfun

The main advantage of trading using opposite Huatian Hotel and Sichuan Swellfun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huatian Hotel position performs unexpectedly, Sichuan Swellfun 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 Sichuan Swellfun will offset losses from the drop in Sichuan Swellfun's long position.

The idea behind Huatian Hotel Group and Sichuan Swellfun Co 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.