Correlation Between Holiday Entertainment and New Asia

Can any of the company-specific risk be diversified away by investing in both Holiday Entertainment and New Asia 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 Holiday Entertainment and New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holiday Entertainment Co and New Asia Construction, you can compare the effects of market volatilities on Holiday Entertainment and New Asia 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 Holiday Entertainment with a short position of New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holiday Entertainment and New Asia.

Diversification Opportunities for Holiday Entertainment and New Asia

-0.79

Correlation Coefficient

Holiday Entertainment  New Asia

Pay attention - limited upside

The 3 months correlation between Holiday and New is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Entertainment Co and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and Holiday Entertainment 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 Holiday Entertainment Co are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Holiday Entertainment i.e., Holiday Entertainment and New Asia go up and down completely randomly.

Pair Corralation between Holiday Entertainment and New Asia

Assuming the 90 days trading horizon Holiday Entertainment Co is expected to under-perform the New Asia. But the stock apears to be less risky and, when comparing its historical volatility, Holiday Entertainment Co is 9.6 times less risky than New Asia. The stock trades about -0.31 of its potential returns per unit of risk. The New Asia Construction is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  1,240  in New Asia Construction on October 22, 2024 and sell it today you would earn a total of  535.00  from holding New Asia Construction or generate 43.15% return on investment over 90 days.

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

Holiday Entertainment Co  vs.  New Asia Construction

Holiday Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

New Asia Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Asia Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, New Asia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holiday Entertainment and New Asia

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

The idea behind Holiday Entertainment Co and New Asia 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.