Correlation Between ECM Libra and Shangri La

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

By analyzing existing cross correlation between ECM Libra Financial and Shangri La Hotels, you can compare the effects of market volatilities on ECM Libra and Shangri La 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 ECM Libra with a short position of Shangri La. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECM Libra and Shangri La.

Diversification Opportunities for ECM Libra and Shangri La

0.36

Correlation Coefficient

ECM Libra  Shangri La

Weak diversification

The 3 months correlation between ECM and Shangri is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ECM Libra Financial and Shangri La Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shangri La Hotels and ECM Libra 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 ECM Libra Financial are associated (or correlated) with Shangri La. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shangri La Hotels has no effect on the direction of ECM Libra i.e., ECM Libra and Shangri La go up and down completely randomly.

Pair Corralation between ECM Libra and Shangri La

Assuming the 90 days trading horizon ECM Libra Financial is expected to under-perform the Shangri La. In addition to that, ECM Libra is 3.45 times more volatile than Shangri La Hotels. It trades about -0.06 of its total potential returns per unit of risk. Shangri La Hotels is currently generating about -0.04 per unit of volatility. If you would invest  203.00  in Shangri La Hotels on September 27, 2024 and sell it today you would lose (2.00) from holding Shangri La Hotels or give up 0.99% of portfolio value over 90 days.

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

ECM Libra Financial  vs.  Shangri La Hotels

ECM Libra Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECM Libra Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Shangri La Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shangri La Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shangri La is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ECM Libra and Shangri La

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

The idea behind ECM Libra Financial and Shangri La Hotels 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.