Correlation Between Hong Leong and Impiana Hotels

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

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

Diversification Opportunities for Hong Leong and Impiana Hotels

-0.54

Correlation Coefficient

Hong Leong  Impiana Hotels

Excellent diversification

The 3 months correlation between Hong and Impiana is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Impiana Hotels Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impiana Hotels Bhd and Hong Leong 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 Hong Leong Bank are associated (or correlated) with Impiana Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impiana Hotels Bhd has no effect on the direction of Hong Leong i.e., Hong Leong and Impiana Hotels go up and down completely randomly.

Pair Corralation between Hong Leong and Impiana Hotels

Assuming the 90 days trading horizon Hong Leong is expected to generate 10.64 times less return on investment than Impiana Hotels. But when comparing it to its historical volatility, Hong Leong Bank is 6.83 times less risky than Impiana Hotels. It trades about 0.04 of its potential returns per unit of risk. Impiana Hotels Bhd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Impiana Hotels Bhd on December 2, 2024 and sell it today you would earn a total of  11.00  from holding Impiana Hotels Bhd or generate 110.0% return on investment over 90 days.

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

Hong Leong Bank  vs.  Impiana Hotels Bhd

Hong Leong Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Leong Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Hong Leong is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Impiana Hotels Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Impiana Hotels Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Impiana Hotels 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 Hong Leong and Impiana Hotels

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

The idea behind Hong Leong Bank and Impiana Hotels 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.