Correlation Between First Hotel and BES Engineering

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

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

Diversification Opportunities for First Hotel and BES Engineering

0.25

Correlation Coefficient

First Hotel  BES Engineering

Modest diversification

The 3 months correlation between First and BES is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and BES Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BES Engineering and First Hotel 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 First Hotel Co are associated (or correlated) with BES Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BES Engineering has no effect on the direction of First Hotel i.e., First Hotel and BES Engineering go up and down completely randomly.

Pair Corralation between First Hotel and BES Engineering

Assuming the 90 days trading horizon First Hotel is expected to generate 5.0 times less return on investment than BES Engineering. But when comparing it to its historical volatility, First Hotel Co is 1.62 times less risky than BES Engineering. It trades about 0.01 of its potential returns per unit of risk. BES Engineering Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  823.00  in BES Engineering Co on October 7, 2024 and sell it today you would earn a total of  237.00  from holding BES Engineering Co or generate 28.8% return on investment over 90 days.

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

First Hotel Co  vs.  BES Engineering Co

First Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Hotel Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

BES Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BES Engineering Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with First Hotel and BES Engineering

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

The idea behind First Hotel Co and BES Engineering 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.