Correlation Between Holiday Island and Wharf Holdings

Can any of the company-specific risk be diversified away by investing in both Holiday Island and Wharf Holdings 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 Wharf Holdings 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 Wharf Holdings, you can compare the effects of market volatilities on Holiday Island and Wharf Holdings 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 Wharf Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holiday Island and Wharf Holdings.

Diversification Opportunities for Holiday Island and Wharf Holdings

0.24

Correlation Coefficient

Holiday Island  Wharf Holdings

Modest diversification

The 3 months correlation between Holiday and Wharf is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Island Holdings and Wharf Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf 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 Wharf Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wharf Holdings has no effect on the direction of Holiday Island i.e., Holiday Island and Wharf Holdings go up and down completely randomly.

Pair Corralation between Holiday Island and Wharf Holdings

Given the investment horizon of 90 days Holiday Island Holdings is expected to under-perform the Wharf Holdings. In addition to that, Holiday Island is 3.78 times more volatile than Wharf Holdings. It trades about -0.05 of its total potential returns per unit of risk. Wharf Holdings is currently generating about -0.09 per unit of volatility. If you would invest  542.00  in Wharf Holdings on November 21, 2024 and sell it today you would lose (94.00) from holding Wharf Holdings or give up 17.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.44%
Values	Daily Returns

Holiday Island Holdings  vs.  Wharf Holdings

Holiday Island Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holiday Island Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak technical indicators, Holiday Island may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Wharf Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wharf Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Holiday Island and Wharf Holdings

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

The idea behind Holiday Island Holdings and Wharf 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.