Correlation Between HOYA Resort and ZongTai Real

Can any of the company-specific risk be diversified away by investing in both HOYA Resort and ZongTai Real 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 HOYA Resort and ZongTai Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HOYA Resort Hotel and ZongTai Real Estate, you can compare the effects of market volatilities on HOYA Resort and ZongTai Real 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 HOYA Resort with a short position of ZongTai Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOYA Resort and ZongTai Real.

Diversification Opportunities for HOYA Resort and ZongTai Real

-0.32

Correlation Coefficient

HOYA Resort  ZongTai Real

Very good diversification

The 3 months correlation between HOYA and ZongTai is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding HOYA Resort Hotel and ZongTai Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZongTai Real Estate and HOYA Resort 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 HOYA Resort Hotel are associated (or correlated) with ZongTai Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZongTai Real Estate has no effect on the direction of HOYA Resort i.e., HOYA Resort and ZongTai Real go up and down completely randomly.

Pair Corralation between HOYA Resort and ZongTai Real

Assuming the 90 days trading horizon HOYA Resort Hotel is expected to generate 1.76 times more return on investment than ZongTai Real. However, HOYA Resort is 1.76 times more volatile than ZongTai Real Estate. It trades about 0.06 of its potential returns per unit of risk. ZongTai Real Estate is currently generating about 0.05 per unit of risk. If you would invest  1,985  in HOYA Resort Hotel on October 7, 2024 and sell it today you would earn a total of  130.00  from holding HOYA Resort Hotel or generate 6.55% return on investment over 90 days.

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

HOYA Resort Hotel  vs.  ZongTai Real Estate

HOYA Resort Hotel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HOYA Resort Hotel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, HOYA Resort may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ZongTai Real Estate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ZongTai Real is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with HOYA Resort and ZongTai Real

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

The idea behind HOYA Resort Hotel and ZongTai Real Estate 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.