Correlation Between First Hotel and Leofoo Development

Can any of the company-specific risk be diversified away by investing in both First Hotel and Leofoo Development 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 Leofoo Development 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 Leofoo Development Co, you can compare the effects of market volatilities on First Hotel and Leofoo Development 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 Leofoo Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hotel and Leofoo Development.

Diversification Opportunities for First Hotel and Leofoo Development

0.22

Correlation Coefficient

First Hotel  Leofoo Development

Modest diversification

The 3 months correlation between First and Leofoo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Leofoo Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leofoo Development 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 Leofoo Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leofoo Development has no effect on the direction of First Hotel i.e., First Hotel and Leofoo Development go up and down completely randomly.

Pair Corralation between First Hotel and Leofoo Development

Assuming the 90 days trading horizon First Hotel Co is expected to generate 0.69 times more return on investment than Leofoo Development. However, First Hotel Co is 1.46 times less risky than Leofoo Development. It trades about -0.03 of its potential returns per unit of risk. Leofoo Development Co is currently generating about -0.07 per unit of risk. If you would invest  1,465  in First Hotel Co on September 16, 2024 and sell it today you would lose (15.00) from holding First Hotel Co or give up 1.02% of portfolio value over 90 days.

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

First Hotel Co  vs.  Leofoo Development 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.

Leofoo Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Hotel and Leofoo Development

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

The idea behind First Hotel Co and Leofoo Development 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.