Correlation Between Byke Hospitality and HEG

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

By analyzing existing cross correlation between The Byke Hospitality and HEG Limited, you can compare the effects of market volatilities on Byke Hospitality and HEG 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 Byke Hospitality with a short position of HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Byke Hospitality and HEG.

Diversification Opportunities for Byke Hospitality and HEG

0.65

Correlation Coefficient

Byke Hospitality  HEG

Poor diversification

The 3 months correlation between Byke and HEG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Byke Hospitality and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Byke Hospitality 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 The Byke Hospitality are associated (or correlated) with HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Byke Hospitality i.e., Byke Hospitality and HEG go up and down completely randomly.

Pair Corralation between Byke Hospitality and HEG

Assuming the 90 days trading horizon Byke Hospitality is expected to generate 217.43 times less return on investment than HEG. But when comparing it to its historical volatility, The Byke Hospitality is 67.24 times less risky than HEG. It trades about 0.06 of its potential returns per unit of risk. HEG Limited is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  16,935  in HEG Limited on October 26, 2024 and sell it today you would earn a total of  24,370  from holding HEG Limited or generate 143.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.45%
Values	Daily Returns

The Byke Hospitality  vs.  HEG Limited

Byke Hospitality

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Byke Hospitality are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Byke Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

HEG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HEG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Byke Hospitality and HEG

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

The idea behind The Byke Hospitality and HEG 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.