Correlation Between HMT and Country Club

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

By analyzing existing cross correlation between HMT Limited and Country Club Hospitality, you can compare the effects of market volatilities on HMT and Country Club 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 HMT with a short position of Country Club. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMT and Country Club.

Diversification Opportunities for HMT and Country Club

0.26

Correlation Coefficient

HMT  Country Club

Modest diversification

The 3 months correlation between HMT and Country is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Country Club Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Country Club Hospitality and HMT 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 HMT Limited are associated (or correlated) with Country Club. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Country Club Hospitality has no effect on the direction of HMT i.e., HMT and Country Club go up and down completely randomly.

Pair Corralation between HMT and Country Club

Assuming the 90 days trading horizon HMT Limited is expected to generate 0.65 times more return on investment than Country Club. However, HMT Limited is 1.53 times less risky than Country Club. It trades about -0.09 of its potential returns per unit of risk. Country Club Hospitality is currently generating about -0.09 per unit of risk. If you would invest  6,978  in HMT Limited on October 8, 2024 and sell it today you would lose (256.00) from holding HMT Limited or give up 3.67% of portfolio value over 90 days.

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

HMT Limited  vs.  Country Club Hospitality

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited 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 rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Country Club Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Country Club Hospitality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Country Club is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HMT and Country Club

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

The idea behind HMT Limited and Country Club Hospitality 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.