Correlation Between Dalata Hotel and HK Electric

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

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

Diversification Opportunities for Dalata Hotel and HK Electric

0.79

Correlation Coefficient

Dalata Hotel  HK Electric

Poor diversification

The 3 months correlation between Dalata and HKT is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dalata Hotel Group and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments and Dalata Hotel 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 Dalata Hotel Group are associated (or correlated) with HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of Dalata Hotel i.e., Dalata Hotel and HK Electric go up and down completely randomly.

Pair Corralation between Dalata Hotel and HK Electric

Assuming the 90 days horizon Dalata Hotel is expected to generate 21.07 times less return on investment than HK Electric. In addition to that, Dalata Hotel is 1.98 times more volatile than HK Electric Investments. It trades about 0.0 of its total potential returns per unit of risk. HK Electric Investments is currently generating about 0.17 per unit of volatility. If you would invest  63.00  in HK Electric Investments on October 10, 2024 and sell it today you would earn a total of  2.00  from holding HK Electric Investments or generate 3.17% return on investment over 90 days.

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

Dalata Hotel Group  vs.  HK Electric Investments

Dalata Hotel Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dalata Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

HK Electric Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, HK Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dalata Hotel and HK Electric

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

The idea behind Dalata Hotel Group and HK Electric Investments 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.