Correlation Between PPHE HOTEL and Hongkong

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

By analyzing existing cross correlation between PPHE HOTEL GROUP and The Hongkong and, you can compare the effects of market volatilities on PPHE HOTEL and Hongkong 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 PPHE HOTEL with a short position of Hongkong. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPHE HOTEL and Hongkong.

Diversification Opportunities for PPHE HOTEL and Hongkong

0.67

Correlation Coefficient

PPHE HOTEL  Hongkong

Poor diversification

The 3 months correlation between PPHE and Hongkong is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PPHE HOTEL GROUP and The Hongkong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hongkong and PPHE 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 PPHE HOTEL GROUP are associated (or correlated) with Hongkong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hongkong has no effect on the direction of PPHE HOTEL i.e., PPHE HOTEL and Hongkong go up and down completely randomly.

Pair Corralation between PPHE HOTEL and Hongkong

Assuming the 90 days trading horizon PPHE HOTEL GROUP is expected to generate 1.66 times more return on investment than Hongkong. However, PPHE HOTEL is 1.66 times more volatile than The Hongkong and. It trades about 0.06 of its potential returns per unit of risk. The Hongkong and is currently generating about 0.09 per unit of risk. If you would invest  1,400  in PPHE HOTEL GROUP on October 26, 2024 and sell it today you would earn a total of  60.00  from holding PPHE HOTEL GROUP or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

PPHE HOTEL GROUP  vs.  The Hongkong and

PPHE HOTEL GROUP

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PPHE HOTEL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

The Hongkong

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hongkong and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hongkong reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PPHE HOTEL and Hongkong

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

The idea behind PPHE HOTEL GROUP and The Hongkong and 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.