Correlation Between Shangri La and Brite Tech

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

By analyzing existing cross correlation between Shangri La Hotels and Brite Tech Bhd, you can compare the effects of market volatilities on Shangri La and Brite Tech 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 Shangri La with a short position of Brite Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shangri La and Brite Tech.

Diversification Opportunities for Shangri La and Brite Tech

0.46

Correlation Coefficient

Shangri La  Brite Tech

Very weak diversification

The 3 months correlation between Shangri and Brite is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shangri La Hotels and Brite Tech Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brite Tech Bhd and Shangri La 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 Shangri La Hotels are associated (or correlated) with Brite Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brite Tech Bhd has no effect on the direction of Shangri La i.e., Shangri La and Brite Tech go up and down completely randomly.

Pair Corralation between Shangri La and Brite Tech

Assuming the 90 days trading horizon Shangri La Hotels is expected to under-perform the Brite Tech. But the stock apears to be less risky and, when comparing its historical volatility, Shangri La Hotels is 2.26 times less risky than Brite Tech. The stock trades about -0.37 of its potential returns per unit of risk. The Brite Tech Bhd is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Brite Tech Bhd on December 4, 2024 and sell it today you would lose (1.00) from holding Brite Tech Bhd or give up 3.45% of portfolio value over 90 days.

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

Shangri La Hotels  vs.  Brite Tech Bhd

Shangri La Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shangri La Hotels 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.

Brite Tech Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brite Tech Bhd 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.

Pair Trading with Shangri La and Brite Tech

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

The idea behind Shangri La Hotels and Brite Tech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.