Correlation Between Eternal Energy and Quality Hospitality

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

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

Diversification Opportunities for Eternal Energy and Quality Hospitality

0.13

Correlation Coefficient

Eternal Energy  Quality Hospitality

Average diversification

The 3 months correlation between Eternal and Quality is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Energy Public and Quality Hospitality Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Hospitality and Eternal Energy 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 Eternal Energy Public are associated (or correlated) with Quality Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Hospitality has no effect on the direction of Eternal Energy i.e., Eternal Energy and Quality Hospitality go up and down completely randomly.

Pair Corralation between Eternal Energy and Quality Hospitality

Assuming the 90 days horizon Eternal Energy Public is expected to generate 5.77 times more return on investment than Quality Hospitality. However, Eternal Energy is 5.77 times more volatile than Quality Hospitality Leasehold. It trades about 0.36 of its potential returns per unit of risk. Quality Hospitality Leasehold is currently generating about -0.09 per unit of risk. If you would invest  16.00  in Eternal Energy Public on October 9, 2024 and sell it today you would earn a total of  47.00  from holding Eternal Energy Public or generate 293.75% return on investment over 90 days.

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

Eternal Energy Public  vs.  Quality Hospitality Leasehold

Eternal Energy Public

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Quality Hospitality

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Hospitality Leasehold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Quality Hospitality 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 Eternal Energy and Quality Hospitality

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

The idea behind Eternal Energy Public and Quality Hospitality 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.