Correlation Between LH Hotel and Regional Container

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

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

Diversification Opportunities for LH Hotel and Regional Container

0.4

Correlation Coefficient

LH Hotel  Regional Container

Very weak diversification

The 3 months correlation between LHHOTEL and Regional is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LH Hotel Leasehold and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines and LH Hotel 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 LH Hotel Leasehold are associated (or correlated) with Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of LH Hotel i.e., LH Hotel and Regional Container go up and down completely randomly.

Pair Corralation between LH Hotel and Regional Container

Assuming the 90 days trading horizon LH Hotel Leasehold is expected to under-perform the Regional Container. In addition to that, LH Hotel is 3.26 times more volatile than Regional Container Lines. It trades about -0.05 of its total potential returns per unit of risk. Regional Container Lines is currently generating about 0.27 per unit of volatility. If you would invest  2,757  in Regional Container Lines on October 23, 2024 and sell it today you would earn a total of  32.00  from holding Regional Container Lines or generate 1.16% return on investment over 90 days.

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

LH Hotel Leasehold  vs.  Regional Container Lines

LH Hotel Leasehold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 5 (%) 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.

Regional Container Lines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LH Hotel and Regional Container

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

The idea behind LH Hotel Leasehold and Regional Container Lines 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.