Correlation Between HNB Finance and Palm Garden

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

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

Diversification Opportunities for HNB Finance and Palm Garden

-0.61

Correlation Coefficient

HNB Finance  Palm Garden

Excellent diversification

The 3 months correlation between HNB and Palm is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HNB Finance and Palm Garden Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palm Garden Hotels and HNB Finance 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 HNB Finance are associated (or correlated) with Palm Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palm Garden Hotels has no effect on the direction of HNB Finance i.e., HNB Finance and Palm Garden go up and down completely randomly.

Pair Corralation between HNB Finance and Palm Garden

Assuming the 90 days trading horizon HNB Finance is expected to under-perform the Palm Garden. In addition to that, HNB Finance is 1.8 times more volatile than Palm Garden Hotels. It trades about -0.08 of its total potential returns per unit of risk. Palm Garden Hotels is currently generating about 0.67 per unit of volatility. If you would invest  4,640  in Palm Garden Hotels on September 25, 2024 and sell it today you would earn a total of  2,890  from holding Palm Garden Hotels or generate 62.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

HNB Finance  vs.  Palm Garden Hotels

HNB Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HNB Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Palm Garden Hotels

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palm Garden Hotels are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Palm Garden sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HNB Finance and Palm Garden

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

The idea behind HNB Finance and Palm Garden 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.