Correlation Between Holiday Entertainment and Simple Mart

Can any of the company-specific risk be diversified away by investing in both Holiday Entertainment and Simple Mart 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 Simple Mart 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 Simple Mart Retail, you can compare the effects of market volatilities on Holiday Entertainment and Simple Mart 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 Simple Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holiday Entertainment and Simple Mart.

Diversification Opportunities for Holiday Entertainment and Simple Mart

0.01

Correlation Coefficient

Holiday Entertainment  Simple Mart

Significant diversification

The 3 months correlation between Holiday and Simple is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Entertainment Co and Simple Mart Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simple Mart Retail 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 Simple Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simple Mart Retail has no effect on the direction of Holiday Entertainment i.e., Holiday Entertainment and Simple Mart go up and down completely randomly.

Pair Corralation between Holiday Entertainment and Simple Mart

Assuming the 90 days trading horizon Holiday Entertainment Co is expected to generate 0.58 times more return on investment than Simple Mart. However, Holiday Entertainment Co is 1.74 times less risky than Simple Mart. It trades about -0.08 of its potential returns per unit of risk. Simple Mart Retail is currently generating about -0.32 per unit of risk. If you would invest  7,960  in Holiday Entertainment Co on September 26, 2024 and sell it today you would lose (50.00) from holding Holiday Entertainment Co or give up 0.63% of portfolio value over 90 days.

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

Holiday Entertainment Co  vs.  Simple Mart Retail

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.

Simple Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simple Mart Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Simple Mart 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 Holiday Entertainment and Simple Mart

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

The idea behind Holiday Entertainment Co and Simple Mart Retail 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.