Correlation Between Grande Hospitality and Prime Office

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

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

Diversification Opportunities for Grande Hospitality and Prime Office

-0.04

Correlation Coefficient

Grande Hospitality  Prime Office

Good diversification

The 3 months correlation between Grande and Prime is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Grande Hospitality Real and Prime Office Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Office Leasehold and Grande Hospitality 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 Grande Hospitality Real are associated (or correlated) with Prime Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Office Leasehold has no effect on the direction of Grande Hospitality i.e., Grande Hospitality and Prime Office go up and down completely randomly.

Pair Corralation between Grande Hospitality and Prime Office

Assuming the 90 days trading horizon Grande Hospitality Real is expected to under-perform the Prime Office. But the stock apears to be less risky and, when comparing its historical volatility, Grande Hospitality Real is 1.03 times less risky than Prime Office. The stock trades about -0.01 of its potential returns per unit of risk. The Prime Office Leasehold is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  545.00  in Prime Office Leasehold on September 2, 2024 and sell it today you would earn a total of  75.00  from holding Prime Office Leasehold or generate 13.76% return on investment over 90 days.

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

Grande Hospitality Real  vs.  Prime Office Leasehold

Grande Hospitality Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grande Hospitality Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Grande Hospitality is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Prime Office Leasehold

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Office Leasehold are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite quite weak forward-looking signals, Prime Office disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grande Hospitality and Prime Office

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

The idea behind Grande Hospitality Real and Prime Office 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.