Correlation Between First Hotel and Thermaltake Technology

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

Diversification Opportunities for First Hotel and Thermaltake Technology

0.36

Correlation Coefficient

First Hotel  Thermaltake Technology

Weak diversification

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

Pair Corralation between First Hotel and Thermaltake Technology

Assuming the 90 days trading horizon First Hotel is expected to generate 6.13 times less return on investment than Thermaltake Technology. But when comparing it to its historical volatility, First Hotel Co is 2.28 times less risky than Thermaltake Technology. It trades about 0.01 of its potential returns per unit of risk. Thermaltake Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,753  in Thermaltake Technology Co on September 26, 2024 and sell it today you would earn a total of  797.00  from holding Thermaltake Technology Co or generate 28.95% 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.  Thermaltake Technology 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.

Thermaltake Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermaltake Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Thermaltake Technology 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 Thermaltake Technology

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

The idea behind First Hotel Co and Thermaltake Technology 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.