Correlation Between First Hotel and Hotel Royal
Can any of the company-specific risk be diversified away by investing in both First Hotel and Hotel Royal 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 Hotel Royal 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 Hotel Royal Chihpen, you can compare the effects of market volatilities on First Hotel and Hotel Royal 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 Hotel Royal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hotel and Hotel Royal.
Diversification Opportunities for First Hotel and Hotel Royal
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Hotel is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Hotel Royal Chihpen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Royal Chihpen 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 Hotel Royal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Royal Chihpen has no effect on the direction of First Hotel i.e., First Hotel and Hotel Royal go up and down completely randomly.
Pair Corralation between First Hotel and Hotel Royal
Assuming the 90 days trading horizon First Hotel Co is expected to generate 0.33 times more return on investment than Hotel Royal. However, First Hotel Co is 3.07 times less risky than Hotel Royal. It trades about -0.08 of its potential returns per unit of risk. Hotel Royal Chihpen is currently generating about -0.07 per unit of risk. If you would invest 1,570 in First Hotel Co on September 26, 2024 and sell it today you would lose (120.00) from holding First Hotel Co or give up 7.64% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
First Hotel Co vs. Hotel Royal Chihpen
Performance |
Timeline |
First Hotel |
Hotel Royal Chihpen |
First Hotel and Hotel Royal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Hotel and Hotel Royal
The main advantage of trading using opposite First Hotel and Hotel Royal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hotel position performs unexpectedly, Hotel Royal 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 Hotel Royal will offset losses from the drop in Hotel Royal's long position.First Hotel vs. Merida Industry Co | First Hotel vs. Cheng Shin Rubber | First Hotel vs. Uni President Enterprises Corp | First Hotel vs. Pou Chen Corp |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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