Correlation Between Baotek Industrial and Hotel Royal

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

By analyzing existing cross correlation between Baotek Industrial Materials and Hotel Royal Chihpen, you can compare the effects of market volatilities on Baotek Industrial and Hotel Royal 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 Baotek Industrial with a short position of Hotel Royal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baotek Industrial and Hotel Royal.

Diversification Opportunities for Baotek Industrial and Hotel Royal

0.71

Correlation Coefficient

Baotek Industrial  Hotel Royal

Poor diversification

The 3 months correlation between Baotek and Hotel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Baotek Industrial Materials and Hotel Royal Chihpen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Royal Chihpen and Baotek Industrial 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 Baotek Industrial Materials are associated (or correlated) with Hotel Royal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Royal Chihpen has no effect on the direction of Baotek Industrial i.e., Baotek Industrial and Hotel Royal go up and down completely randomly.

Pair Corralation between Baotek Industrial and Hotel Royal

Assuming the 90 days trading horizon Baotek Industrial Materials is expected to under-perform the Hotel Royal. In addition to that, Baotek Industrial is 1.5 times more volatile than Hotel Royal Chihpen. It trades about -0.04 of its total potential returns per unit of risk. Hotel Royal Chihpen is currently generating about -0.06 per unit of volatility. If you would invest  4,874  in Hotel Royal Chihpen on September 27, 2024 and sell it today you would lose (1,389) from holding Hotel Royal Chihpen or give up 28.5% of portfolio value over 90 days.

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

Baotek Industrial Materials  vs.  Hotel Royal Chihpen

Baotek Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baotek Industrial Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hotel Royal Chihpen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Royal Chihpen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Baotek Industrial and Hotel Royal

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

The idea behind Baotek Industrial Materials and Hotel Royal Chihpen 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.