Correlation Between SSAW Hotels and Sichuan Swellfun

Can any of the company-specific risk be diversified away by investing in both SSAW Hotels and Sichuan Swellfun 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 SSAW Hotels and Sichuan Swellfun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SSAW Hotels Resorts and Sichuan Swellfun Co, you can compare the effects of market volatilities on SSAW Hotels and Sichuan Swellfun 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 SSAW Hotels with a short position of Sichuan Swellfun. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSAW Hotels and Sichuan Swellfun.

Diversification Opportunities for SSAW Hotels and Sichuan Swellfun

0.89

Correlation Coefficient

SSAW Hotels  Sichuan Swellfun

Very poor diversification

The 3 months correlation between SSAW and Sichuan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SSAW Hotels Resorts and Sichuan Swellfun Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Swellfun and SSAW Hotels 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 SSAW Hotels Resorts are associated (or correlated) with Sichuan Swellfun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Swellfun has no effect on the direction of SSAW Hotels i.e., SSAW Hotels and Sichuan Swellfun go up and down completely randomly.

Pair Corralation between SSAW Hotels and Sichuan Swellfun

Assuming the 90 days trading horizon SSAW Hotels Resorts is expected to generate 0.97 times more return on investment than Sichuan Swellfun. However, SSAW Hotels Resorts is 1.03 times less risky than Sichuan Swellfun. It trades about 0.03 of its potential returns per unit of risk. Sichuan Swellfun Co is currently generating about -0.03 per unit of risk. If you would invest  2,241  in SSAW Hotels Resorts on December 24, 2024 and sell it today you would earn a total of  55.00  from holding SSAW Hotels Resorts or generate 2.45% return on investment over 90 days.

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

SSAW Hotels Resorts  vs.  Sichuan Swellfun Co

SSAW Hotels Resorts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSAW Hotels Resorts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SSAW Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sichuan Swellfun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Swellfun Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sichuan Swellfun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SSAW Hotels and Sichuan Swellfun

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

The idea behind SSAW Hotels Resorts and Sichuan Swellfun 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.