Correlation Between Holiday Island and Longfor Group

Can any of the company-specific risk be diversified away by investing in both Holiday Island and Longfor Group 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 Holiday Island and Longfor Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holiday Island Holdings and Longfor Group Holdings, you can compare the effects of market volatilities on Holiday Island and Longfor Group 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 Holiday Island with a short position of Longfor Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holiday Island and Longfor Group.

Diversification Opportunities for Holiday Island and Longfor Group

0.7

Correlation Coefficient

Holiday Island  Longfor Group

Poor diversification

The 3 months correlation between Holiday and Longfor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Island Holdings and Longfor Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longfor Group Holdings and Holiday Island 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 Holiday Island Holdings are associated (or correlated) with Longfor Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longfor Group Holdings has no effect on the direction of Holiday Island i.e., Holiday Island and Longfor Group go up and down completely randomly.

Pair Corralation between Holiday Island and Longfor Group

Given the investment horizon of 90 days Holiday Island Holdings is expected to generate 5.17 times more return on investment than Longfor Group. However, Holiday Island is 5.17 times more volatile than Longfor Group Holdings. It trades about 0.11 of its potential returns per unit of risk. Longfor Group Holdings is currently generating about -0.08 per unit of risk. If you would invest  2.13  in Holiday Island Holdings on December 29, 2024 and sell it today you would lose (0.03) from holding Holiday Island Holdings or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Holiday Island Holdings  vs.  Longfor Group Holdings

Holiday Island Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Longfor Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Holiday Island and Longfor Group

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

The idea behind Holiday Island Holdings and Longfor Group Holdings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.