Correlation Between BTG Hotels and Shenwan Hongyuan

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

By analyzing existing cross correlation between BTG Hotels Group and Shenwan Hongyuan Group, you can compare the effects of market volatilities on BTG Hotels and Shenwan Hongyuan 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 BTG Hotels with a short position of Shenwan Hongyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Hotels and Shenwan Hongyuan.

Diversification Opportunities for BTG Hotels and Shenwan Hongyuan

0.72

Correlation Coefficient

BTG Hotels  Shenwan Hongyuan

Poor diversification

The 3 months correlation between BTG and Shenwan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BTG Hotels Group and Shenwan Hongyuan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwan Hongyuan and BTG Hotels 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 BTG Hotels Group are associated (or correlated) with Shenwan Hongyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwan Hongyuan has no effect on the direction of BTG Hotels i.e., BTG Hotels and Shenwan Hongyuan go up and down completely randomly.

Pair Corralation between BTG Hotels and Shenwan Hongyuan

Assuming the 90 days trading horizon BTG Hotels Group is expected to generate 1.01 times more return on investment than Shenwan Hongyuan. However, BTG Hotels is 1.01 times more volatile than Shenwan Hongyuan Group. It trades about -0.08 of its potential returns per unit of risk. Shenwan Hongyuan Group is currently generating about -0.1 per unit of risk. If you would invest  1,493  in BTG Hotels Group on December 25, 2024 and sell it today you would lose (104.00) from holding BTG Hotels Group or give up 6.97% of portfolio value over 90 days.

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

BTG Hotels Group  vs.  Shenwan Hongyuan Group

BTG Hotels Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days BTG Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenwan Hongyuan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenwan Hongyuan Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BTG Hotels and Shenwan Hongyuan

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

The idea behind BTG Hotels Group and Shenwan Hongyuan Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.