Correlation Between Fine Metal and Quality Hospitality

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

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

Diversification Opportunities for Fine Metal and Quality Hospitality

0.62

Correlation Coefficient

Fine Metal  Quality Hospitality

Poor diversification

The 3 months correlation between Fine and Quality is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fine Metal Technologies and Quality Hospitality Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Hospitality and Fine Metal 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 Fine Metal Technologies 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 Fine Metal i.e., Fine Metal and Quality Hospitality go up and down completely randomly.

Pair Corralation between Fine Metal and Quality Hospitality

Assuming the 90 days trading horizon Fine Metal Technologies is expected to under-perform the Quality Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Fine Metal Technologies is 1.18 times less risky than Quality Hospitality. The stock trades about -0.19 of its potential returns per unit of risk. The Quality Hospitality Leasehold is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  340.00  in Quality Hospitality Leasehold on December 22, 2024 and sell it today you would lose (20.00) from holding Quality Hospitality Leasehold or give up 5.88% of portfolio value over 90 days.

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

Fine Metal Technologies  vs.  Quality Hospitality Leasehold

Fine Metal Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Quality Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Hospitality Leasehold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Quality Hospitality is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fine Metal and Quality Hospitality

The main advantage of trading using opposite Fine Metal and Quality Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fine Metal 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 Fine Metal Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.