Correlation Between Shin Tai and Hotel Holiday

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

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

Diversification Opportunities for Shin Tai and Hotel Holiday

0.03

Correlation Coefficient

Shin Tai  Hotel Holiday

Significant diversification

The 3 months correlation between Shin and Hotel is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shin Tai Industry and Hotel Holiday Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Holiday Garden and Shin Tai 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 Shin Tai Industry are associated (or correlated) with Hotel Holiday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Holiday Garden has no effect on the direction of Shin Tai i.e., Shin Tai and Hotel Holiday go up and down completely randomly.

Pair Corralation between Shin Tai and Hotel Holiday

Assuming the 90 days trading horizon Shin Tai Industry is expected to generate 2.45 times more return on investment than Hotel Holiday. However, Shin Tai is 2.45 times more volatile than Hotel Holiday Garden. It trades about 0.17 of its potential returns per unit of risk. Hotel Holiday Garden is currently generating about -0.06 per unit of risk. If you would invest  7,610  in Shin Tai Industry on December 29, 2024 and sell it today you would earn a total of  2,490  from holding Shin Tai Industry or generate 32.72% return on investment over 90 days.

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

Shin Tai Industry  vs.  Hotel Holiday Garden

Shin Tai Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Tai Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Tai showed solid returns over the last few months and may actually be approaching a breakup point.

Hotel Holiday Garden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hotel Holiday Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hotel Holiday is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Shin Tai and Hotel Holiday

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

The idea behind Shin Tai Industry and Hotel Holiday Garden 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.