Correlation Between Leofoo Development and First Hotel

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

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

Diversification Opportunities for Leofoo Development and First Hotel

0.7

Correlation Coefficient

Leofoo Development  First Hotel

Poor diversification

The 3 months correlation between Leofoo and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Leofoo Development Co and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel and Leofoo Development 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 Leofoo Development Co are associated (or correlated) with First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of Leofoo Development i.e., Leofoo Development and First Hotel go up and down completely randomly.

Pair Corralation between Leofoo Development and First Hotel

Assuming the 90 days trading horizon Leofoo Development Co is expected to under-perform the First Hotel. In addition to that, Leofoo Development is 1.68 times more volatile than First Hotel Co. It trades about -0.02 of its total potential returns per unit of risk. First Hotel Co is currently generating about 0.09 per unit of volatility. If you would invest  1,470  in First Hotel Co on December 5, 2024 and sell it today you would earn a total of  10.00  from holding First Hotel Co or generate 0.68% return on investment over 90 days.

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

Leofoo Development Co  vs.  First Hotel Co

Leofoo Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Leofoo Development Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Leofoo Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Hotel

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Hotel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Hotel 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 Leofoo Development and First Hotel

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

The idea behind Leofoo Development Co and First Hotel 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.