Correlation Between CROBEX and Arena Hospitality

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

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

Diversification Opportunities for CROBEX and Arena Hospitality

-0.77

Correlation Coefficient

CROBEX  Arena Hospitality

Pay attention - limited upside

The 3 months correlation between CROBEX and Arena is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CROBEX and Arena Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Hospitality and CROBEX 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 CROBEX are associated (or correlated) with Arena Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Hospitality has no effect on the direction of CROBEX i.e., CROBEX and Arena Hospitality go up and down completely randomly.

Pair Corralation between CROBEX and Arena Hospitality

Assuming the 90 days trading horizon CROBEX is expected to generate 0.41 times more return on investment than Arena Hospitality. However, CROBEX is 2.46 times less risky than Arena Hospitality. It trades about 0.27 of its potential returns per unit of risk. Arena Hospitality Group is currently generating about -0.05 per unit of risk. If you would invest  295,757  in CROBEX on September 12, 2024 and sell it today you would earn a total of  19,865  from holding CROBEX or generate 6.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.1%
Values	Daily Returns

CROBEX  vs.  Arena Hospitality Group

Pair Trading with CROBEX and Arena Hospitality

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

The idea behind CROBEX and Arena Hospitality Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.