Correlation Between Global Green and LH Hotel

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Can any of the company-specific risk be diversified away by investing in both Global Green 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 Global Green and LH Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Green Chemicals and LH Hotel Leasehold, you can compare the effects of market volatilities on Global Green 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 Global Green with a short position of LH Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Green and LH Hotel.

Diversification Opportunities for Global Green and LH Hotel

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Global and LHHOTEL is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Global Green Chemicals 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 Global Green 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 Global Green Chemicals 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 Global Green i.e., Global Green and LH Hotel go up and down completely randomly.

Pair Corralation between Global Green and LH Hotel

Assuming the 90 days trading horizon Global Green Chemicals is expected to generate 36.65 times more return on investment than LH Hotel. However, Global Green is 36.65 times more volatile than LH Hotel Leasehold. It trades about 0.04 of its potential returns per unit of risk. LH Hotel Leasehold is currently generating about 0.04 per unit of risk. If you would invest  1,459  in Global Green Chemicals on October 22, 2024 and sell it today you would lose (1,059) from holding Global Green Chemicals or give up 72.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Global Green Chemicals  vs.  LH Hotel Leasehold

 Performance 
       Timeline  
Global Green Chemicals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Global Green Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
LH Hotel Leasehold 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 2 (%) 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.

Global Green and LH Hotel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global Green and LH Hotel

The main advantage of trading using opposite Global Green and LH Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Green 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 Global Green Chemicals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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