Correlation Between Asian Hotels and Paramount Communications

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

Diversification Opportunities for Asian Hotels and Paramount Communications

-0.39

Correlation Coefficient

Asian Hotels  Paramount Communications

Very good diversification

The 3 months correlation between Asian and Paramount is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and Paramount Communications Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Communications 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 Paramount Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Communications has no effect on the direction of Asian Hotels i.e., Asian Hotels and Paramount Communications go up and down completely randomly.

Pair Corralation between Asian Hotels and Paramount Communications

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.19 times more return on investment than Paramount Communications. However, Asian Hotels is 1.19 times more volatile than Paramount Communications Limited. It trades about 0.04 of its potential returns per unit of risk. Paramount Communications Limited is currently generating about -0.14 per unit of risk. If you would invest  18,255  in Asian Hotels Limited on August 31, 2024 and sell it today you would earn a total of  797.00  from holding Asian Hotels Limited or generate 4.37% 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.  Paramount Communications Limit

Asian Hotels Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Asian Hotels may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Paramount Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Asian Hotels and Paramount Communications

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

The idea behind Asian Hotels Limited and Paramount Communications Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.