Correlation Between Asian Hotels and Consolidated Construction

Can any of the company-specific risk be diversified away by investing in both Asian Hotels and Consolidated Construction 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 Asian Hotels and Consolidated Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asian Hotels Limited and Consolidated Construction Consortium, you can compare the effects of market volatilities on Asian Hotels and Consolidated Construction 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 Asian Hotels with a short position of Consolidated Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asian Hotels and Consolidated Construction.

Diversification Opportunities for Asian Hotels and Consolidated Construction

-0.3

Correlation Coefficient

Asian Hotels  Consolidated Construction

Very good diversification

The 3 months correlation between Asian and Consolidated is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction and Asian 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 Asian Hotels Limited are associated (or correlated) with Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of Asian Hotels i.e., Asian Hotels and Consolidated Construction go up and down completely randomly.

Pair Corralation between Asian Hotels and Consolidated Construction

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.2 times more return on investment than Consolidated Construction. However, Asian Hotels is 1.2 times more volatile than Consolidated Construction Consortium. It trades about 0.25 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about -0.04 per unit of risk. If you would invest  17,728  in Asian Hotels Limited on October 24, 2024 and sell it today you would earn a total of  12,622  from holding Asian Hotels Limited or generate 71.2% return on investment over 90 days.

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

Asian Hotels Limited  vs.  Consolidated Construction Cons

Asian Hotels Limited

Risk-Adjusted Performance

19 of 100

Solid

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

Consolidated Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Construction Consortium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Asian Hotels and Consolidated Construction

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

The idea behind Asian Hotels Limited and Consolidated Construction Consortium 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.