Correlation Between ECSTELECOM and Hotel Shilla

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

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

Diversification Opportunities for ECSTELECOM and Hotel Shilla

-0.09

Correlation Coefficient

ECSTELECOM  Hotel Shilla

Good diversification

The 3 months correlation between ECSTELECOM and Hotel is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ECSTELECOM Co and Hotel Shilla Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Shilla and ECSTELECOM 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 ECSTELECOM Co are associated (or correlated) with Hotel Shilla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Shilla has no effect on the direction of ECSTELECOM i.e., ECSTELECOM and Hotel Shilla go up and down completely randomly.

Pair Corralation between ECSTELECOM and Hotel Shilla

Assuming the 90 days trading horizon ECSTELECOM Co is expected to under-perform the Hotel Shilla. But the stock apears to be less risky and, when comparing its historical volatility, ECSTELECOM Co is 1.02 times less risky than Hotel Shilla. The stock trades about -0.09 of its potential returns per unit of risk. The Hotel Shilla Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,055,000  in Hotel Shilla Co on December 25, 2024 and sell it today you would earn a total of  350,000  from holding Hotel Shilla Co or generate 11.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ECSTELECOM Co  vs.  Hotel Shilla Co

ECSTELECOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECSTELECOM Co 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.

Hotel Shilla

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Shilla Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hotel Shilla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECSTELECOM and Hotel Shilla

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

The idea behind ECSTELECOM Co and Hotel Shilla 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 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.