Correlation Between Heng Leasing and LH Hotel

Can any of the company-specific risk be diversified away by investing in both Heng Leasing 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 Heng Leasing and LH Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heng Leasing Capital and LH Hotel Leasehold, you can compare the effects of market volatilities on Heng Leasing 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 Heng Leasing with a short position of LH Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heng Leasing and LH Hotel.

Diversification Opportunities for Heng Leasing and LH Hotel

-0.77

Correlation Coefficient

Heng Leasing  LH Hotel

Pay attention - limited upside

The 3 months correlation between Heng and LHHOTEL is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Heng Leasing Capital 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 Heng Leasing 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 Heng Leasing Capital 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 Heng Leasing i.e., Heng Leasing and LH Hotel go up and down completely randomly.

Pair Corralation between Heng Leasing and LH Hotel

Assuming the 90 days trading horizon Heng Leasing Capital is expected to under-perform the LH Hotel. In addition to that, Heng Leasing is 2.27 times more volatile than LH Hotel Leasehold. It trades about -0.2 of its total potential returns per unit of risk. LH Hotel Leasehold is currently generating about 0.05 per unit of volatility. If you would invest  1,268  in LH Hotel Leasehold on October 24, 2024 and sell it today you would earn a total of  42.00  from holding LH Hotel Leasehold or generate 3.31% return on investment over 90 days.

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

Heng Leasing Capital  vs.  LH Hotel Leasehold

Heng Leasing Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heng Leasing Capital 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 forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

LH Hotel Leasehold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 4 (%) 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.

Pair Trading with Heng Leasing and LH Hotel

The main advantage of trading using opposite Heng Leasing and LH Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heng Leasing 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 Heng Leasing Capital 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.