Correlation Between Grande Asset and Laguna Resorts

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

By analyzing existing cross correlation between Grande Asset Hotels and Laguna Resorts Hotels, you can compare the effects of market volatilities on Grande Asset and Laguna Resorts 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 Asset with a short position of Laguna Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grande Asset and Laguna Resorts.

Diversification Opportunities for Grande Asset and Laguna Resorts

0.19

Correlation Coefficient

Grande Asset  Laguna Resorts

Average diversification

The 3 months correlation between Grande and Laguna is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Grande Asset Hotels and Laguna Resorts Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laguna Resorts Hotels and Grande Asset 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 Asset Hotels are associated (or correlated) with Laguna Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laguna Resorts Hotels has no effect on the direction of Grande Asset i.e., Grande Asset and Laguna Resorts go up and down completely randomly.

Pair Corralation between Grande Asset and Laguna Resorts

Assuming the 90 days trading horizon Grande Asset Hotels is expected to generate 7.27 times more return on investment than Laguna Resorts. However, Grande Asset is 7.27 times more volatile than Laguna Resorts Hotels. It trades about 0.02 of its potential returns per unit of risk. Laguna Resorts Hotels is currently generating about 0.01 per unit of risk. If you would invest  6.00  in Grande Asset Hotels on December 23, 2024 and sell it today you would lose (2.00) from holding Grande Asset Hotels or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Grande Asset Hotels  vs.  Laguna Resorts Hotels

Grande Asset Hotels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grande Asset Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Grande Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Laguna Resorts Hotels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laguna Resorts Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, Laguna Resorts 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 Grande Asset and Laguna Resorts

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

The idea behind Grande Asset Hotels and Laguna Resorts Hotels 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.