Correlation Between Hollywood Bowl and TIANDE CHEMICAL

Can any of the company-specific risk be diversified away by investing in both Hollywood Bowl and TIANDE CHEMICAL 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 Hollywood Bowl and TIANDE CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hollywood Bowl Group and TIANDE CHEMICAL, you can compare the effects of market volatilities on Hollywood Bowl and TIANDE CHEMICAL 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 Hollywood Bowl with a short position of TIANDE CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hollywood Bowl and TIANDE CHEMICAL.

Diversification Opportunities for Hollywood Bowl and TIANDE CHEMICAL

0.42

Correlation Coefficient

Hollywood Bowl  TIANDE CHEMICAL

Very weak diversification

The 3 months correlation between Hollywood and TIANDE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and TIANDE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIANDE CHEMICAL and Hollywood Bowl 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 Hollywood Bowl Group are associated (or correlated) with TIANDE CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIANDE CHEMICAL has no effect on the direction of Hollywood Bowl i.e., Hollywood Bowl and TIANDE CHEMICAL go up and down completely randomly.

Pair Corralation between Hollywood Bowl and TIANDE CHEMICAL

Assuming the 90 days horizon Hollywood Bowl Group is expected to under-perform the TIANDE CHEMICAL. But the stock apears to be less risky and, when comparing its historical volatility, Hollywood Bowl Group is 2.37 times less risky than TIANDE CHEMICAL. The stock trades about -0.05 of its potential returns per unit of risk. The TIANDE CHEMICAL is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5.25  in TIANDE CHEMICAL on October 5, 2024 and sell it today you would earn a total of  2.00  from holding TIANDE CHEMICAL or generate 38.1% return on investment over 90 days.

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

Hollywood Bowl Group  vs.  TIANDE CHEMICAL

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

TIANDE CHEMICAL

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days TIANDE CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, TIANDE CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hollywood Bowl and TIANDE CHEMICAL

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

The idea behind Hollywood Bowl Group and TIANDE CHEMICAL 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.