Correlation Between BTG Hotels and Xinjiang Communications

Can any of the company-specific risk be diversified away by investing in both BTG Hotels and Xinjiang Communications 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 Xinjiang Communications 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 Xinjiang Communications Construction, you can compare the effects of market volatilities on BTG Hotels and Xinjiang Communications 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 Xinjiang Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Hotels and Xinjiang Communications.

Diversification Opportunities for BTG Hotels and Xinjiang Communications

0.58

Correlation Coefficient

BTG Hotels  Xinjiang Communications

Very weak diversification

The 3 months correlation between BTG and Xinjiang is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BTG Hotels Group and Xinjiang Communications Constr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Communications 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 Xinjiang Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Communications has no effect on the direction of BTG Hotels i.e., BTG Hotels and Xinjiang Communications go up and down completely randomly.

Pair Corralation between BTG Hotels and Xinjiang Communications

Assuming the 90 days trading horizon BTG Hotels Group is expected to generate 0.99 times more return on investment than Xinjiang Communications. However, BTG Hotels Group is 1.01 times less risky than Xinjiang Communications. It trades about -0.08 of its potential returns per unit of risk. Xinjiang Communications Construction is currently generating about -0.34 per unit of risk. If you would invest  1,462  in BTG Hotels Group on October 8, 2024 and sell it today you would lose (62.00) from holding BTG Hotels Group or give up 4.24% of portfolio value over 90 days.

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

BTG Hotels Group  vs.  Xinjiang Communications Constr

BTG Hotels Group

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, BTG Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xinjiang Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinjiang Communications Construction 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 Xinjiang Communications

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

The idea behind BTG Hotels Group and Xinjiang Communications Construction 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.