Correlation Between Hotel Holiday and China Container

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

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

Diversification Opportunities for Hotel Holiday and China Container

-0.18

Correlation Coefficient

Hotel Holiday  China Container

Good diversification

The 3 months correlation between Hotel and China is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Holiday Garden and China Container Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Container Terminal and Hotel Holiday 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 Hotel Holiday Garden are associated (or correlated) with China Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Container Terminal has no effect on the direction of Hotel Holiday i.e., Hotel Holiday and China Container go up and down completely randomly.

Pair Corralation between Hotel Holiday and China Container

Assuming the 90 days trading horizon Hotel Holiday Garden is expected to under-perform the China Container. But the stock apears to be less risky and, when comparing its historical volatility, Hotel Holiday Garden is 1.45 times less risky than China Container. The stock trades about -0.02 of its potential returns per unit of risk. The China Container Terminal is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  3,010  in China Container Terminal on December 5, 2024 and sell it today you would earn a total of  355.00  from holding China Container Terminal or generate 11.79% return on investment over 90 days.

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

Hotel Holiday Garden  vs.  China Container Terminal

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.

China Container Terminal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Container Terminal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Container 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 Hotel Holiday and China Container

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

The idea behind Hotel Holiday Garden and China Container Terminal 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.