Correlation Between YTL Hospitality and Dagang Nexchange

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

By analyzing existing cross correlation between YTL Hospitality REIT and Dagang Nexchange Bhd, you can compare the effects of market volatilities on YTL Hospitality and Dagang Nexchange 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 YTL Hospitality with a short position of Dagang Nexchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of YTL Hospitality and Dagang Nexchange.

Diversification Opportunities for YTL Hospitality and Dagang Nexchange

0.86

Correlation Coefficient

YTL Hospitality  Dagang Nexchange

Very poor diversification

The 3 months correlation between YTL and Dagang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding YTL Hospitality REIT and Dagang Nexchange Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dagang Nexchange Bhd and YTL Hospitality 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 YTL Hospitality REIT are associated (or correlated) with Dagang Nexchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dagang Nexchange Bhd has no effect on the direction of YTL Hospitality i.e., YTL Hospitality and Dagang Nexchange go up and down completely randomly.

Pair Corralation between YTL Hospitality and Dagang Nexchange

Assuming the 90 days trading horizon YTL Hospitality REIT is expected to generate 0.32 times more return on investment than Dagang Nexchange. However, YTL Hospitality REIT is 3.12 times less risky than Dagang Nexchange. It trades about -0.14 of its potential returns per unit of risk. Dagang Nexchange Bhd is currently generating about -0.16 per unit of risk. If you would invest  116.00  in YTL Hospitality REIT on December 30, 2024 and sell it today you would lose (12.00) from holding YTL Hospitality REIT or give up 10.34% of portfolio value over 90 days.

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

YTL Hospitality REIT  vs.  Dagang Nexchange Bhd

YTL Hospitality REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days YTL Hospitality REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Dagang Nexchange Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dagang Nexchange Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with YTL Hospitality and Dagang Nexchange

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

The idea behind YTL Hospitality REIT and Dagang Nexchange Bhd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.