Correlation Between PChome Online and First Hotel

Can any of the company-specific risk be diversified away by investing in both PChome Online and First Hotel 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 PChome Online and First Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PChome Online and First Hotel Co, you can compare the effects of market volatilities on PChome Online and First Hotel 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 PChome Online with a short position of First Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of PChome Online and First Hotel.

Diversification Opportunities for PChome Online and First Hotel

-0.07

Correlation Coefficient

PChome Online  First Hotel

Good diversification

The 3 months correlation between PChome and First is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PChome Online and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel and PChome Online 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 PChome Online are associated (or correlated) with First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of PChome Online i.e., PChome Online and First Hotel go up and down completely randomly.

Pair Corralation between PChome Online and First Hotel

Assuming the 90 days trading horizon PChome Online is expected to generate 1.97 times more return on investment than First Hotel. However, PChome Online is 1.97 times more volatile than First Hotel Co. It trades about 0.01 of its potential returns per unit of risk. First Hotel Co is currently generating about 0.01 per unit of risk. If you would invest  5,243  in PChome Online on September 20, 2024 and sell it today you would earn a total of  77.00  from holding PChome Online or generate 1.47% return on investment over 90 days.

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

PChome Online  vs.  First Hotel Co

PChome Online

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PChome Online are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PChome Online showed solid returns over the last few months and may actually be approaching a breakup point.

First Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Hotel Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Hotel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PChome Online and First Hotel

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

The idea behind PChome Online and First Hotel Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.