Correlation Between Dupont De and LH Hotel

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

By analyzing existing cross correlation between Dupont De Nemours and LH Hotel Leasehold, you can compare the effects of market volatilities on Dupont De and LH Hotel 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 Dupont De with a short position of LH Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and LH Hotel.

Diversification Opportunities for Dupont De and LH Hotel

-0.17

Correlation Coefficient

Dupont De  LH Hotel

Good diversification

The 3 months correlation between Dupont and LHHOTEL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and LH Hotel Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Hotel Leasehold and Dupont De 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 Dupont De Nemours are associated (or correlated) with LH Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Hotel Leasehold has no effect on the direction of Dupont De i.e., Dupont De and LH Hotel go up and down completely randomly.

Pair Corralation between Dupont De and LH Hotel

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the LH Hotel. In addition to that, Dupont De is 1.85 times more volatile than LH Hotel Leasehold. It trades about -0.01 of its total potential returns per unit of risk. LH Hotel Leasehold is currently generating about 0.11 per unit of volatility. If you would invest  1,313  in LH Hotel Leasehold on December 30, 2024 and sell it today you would earn a total of  77.00  from holding LH Hotel Leasehold or generate 5.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Dupont De Nemours  vs.  LH Hotel Leasehold

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

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

LH Hotel Leasehold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, LH Hotel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dupont De and LH Hotel

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

The idea behind Dupont De Nemours and LH Hotel Leasehold 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.