Correlation Between First Hotel and Dimerco Data

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

Diversification Opportunities for First Hotel and Dimerco Data

0.74

Correlation Coefficient

First Hotel  Dimerco Data

Poor diversification

The 3 months correlation between First and Dimerco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Dimerco Data System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimerco Data System 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 Dimerco Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimerco Data System has no effect on the direction of First Hotel i.e., First Hotel and Dimerco Data go up and down completely randomly.

Pair Corralation between First Hotel and Dimerco Data

Assuming the 90 days trading horizon First Hotel is expected to generate 109.06 times less return on investment than Dimerco Data. But when comparing it to its historical volatility, First Hotel Co is 1.91 times less risky than Dimerco Data. It trades about 0.0 of its potential returns per unit of risk. Dimerco Data System is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,850  in Dimerco Data System on December 25, 2024 and sell it today you would earn a total of  1,150  from holding Dimerco Data System or generate 9.7% return on investment over 90 days.

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

First Hotel Co  vs.  Dimerco Data System

First Hotel

Risk-Adjusted Performance

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.

Dimerco Data System

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimerco Data System are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dimerco Data may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Hotel and Dimerco Data

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

The idea behind First Hotel Co and Dimerco Data System 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.