Correlation Between FarGlory Hotel and Plastron Precision

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

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

Diversification Opportunities for FarGlory Hotel and Plastron Precision

0.54

Correlation Coefficient

FarGlory Hotel  Plastron Precision

Very weak diversification

The 3 months correlation between FarGlory and Plastron is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding FarGlory Hotel Co and Plastron Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastron Precision and FarGlory 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 FarGlory Hotel Co are associated (or correlated) with Plastron Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastron Precision has no effect on the direction of FarGlory Hotel i.e., FarGlory Hotel and Plastron Precision go up and down completely randomly.

Pair Corralation between FarGlory Hotel and Plastron Precision

Assuming the 90 days trading horizon FarGlory Hotel Co is expected to generate 1.78 times more return on investment than Plastron Precision. However, FarGlory Hotel is 1.78 times more volatile than Plastron Precision Co. It trades about 0.05 of its potential returns per unit of risk. Plastron Precision Co is currently generating about -0.08 per unit of risk. If you would invest  2,475  in FarGlory Hotel Co on October 12, 2024 and sell it today you would earn a total of  35.00  from holding FarGlory Hotel Co or generate 1.41% return on investment over 90 days.

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

FarGlory Hotel Co  vs.  Plastron Precision Co

FarGlory Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FarGlory Hotel Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FarGlory Hotel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Plastron Precision

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind FarGlory Hotel Co and Plastron Precision 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.