Correlation Between Shangri La and Computer Forms

Can any of the company-specific risk be diversified away by investing in both Shangri La and Computer Forms 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 Computer Forms 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 Computer Forms Bhd, you can compare the effects of market volatilities on Shangri La and Computer Forms 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 Computer Forms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shangri La and Computer Forms.

Diversification Opportunities for Shangri La and Computer Forms

0.42

Correlation Coefficient

Shangri La  Computer Forms

Very weak diversification

The 3 months correlation between Shangri and Computer is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shangri La Hotels and Computer Forms Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Forms 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 Computer Forms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Forms Bhd has no effect on the direction of Shangri La i.e., Shangri La and Computer Forms go up and down completely randomly.

Pair Corralation between Shangri La and Computer Forms

Assuming the 90 days trading horizon Shangri La Hotels is expected to under-perform the Computer Forms. But the stock apears to be less risky and, when comparing its historical volatility, Shangri La Hotels is 2.67 times less risky than Computer Forms. The stock trades about -0.04 of its potential returns per unit of risk. The Computer Forms Bhd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Computer Forms Bhd on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Computer Forms Bhd or generate 0.0% return on investment over 90 days.

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

Shangri La Hotels  vs.  Computer Forms Bhd

Shangri La Hotels

Risk-Adjusted Performance

0 of 100

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 quite persistent basic indicators, Shangri La is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Computer Forms Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Forms Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Computer Forms is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Shangri La and Computer Forms

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

The idea behind Shangri La Hotels and Computer Forms 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.