Correlation Between BTG Hotels and Hangzhou Pinming

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

Diversification Opportunities for BTG Hotels and Hangzhou Pinming

0.11

Correlation Coefficient

BTG Hotels  Hangzhou Pinming

Average diversification

The 3 months correlation between BTG and Hangzhou is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BTG Hotels Group and Hangzhou Pinming Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Pinming Software 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 Hangzhou Pinming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Pinming Software has no effect on the direction of BTG Hotels i.e., BTG Hotels and Hangzhou Pinming go up and down completely randomly.

Pair Corralation between BTG Hotels and Hangzhou Pinming

Assuming the 90 days trading horizon BTG Hotels Group is expected to under-perform the Hangzhou Pinming. But the stock apears to be less risky and, when comparing its historical volatility, BTG Hotels Group is 1.58 times less risky than Hangzhou Pinming. The stock trades about -0.09 of its potential returns per unit of risk. The Hangzhou Pinming Software is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,825  in Hangzhou Pinming Software on December 4, 2024 and sell it today you would lose (28.00) from holding Hangzhou Pinming Software or give up 0.99% of portfolio value over 90 days.

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

BTG Hotels Group  vs.  Hangzhou Pinming Software

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.

Hangzhou Pinming Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hangzhou Pinming Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hangzhou Pinming is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BTG Hotels and Hangzhou Pinming

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

The idea behind BTG Hotels Group and Hangzhou Pinming Software 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.