Correlation Between LH Hotel and SET50 Index

Can any of the company-specific risk be diversified away by investing in both LH Hotel and SET50 Index 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 SET50 Index 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 SET50 Index, you can compare the effects of market volatilities on LH Hotel and SET50 Index 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 SET50 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of LH Hotel and SET50 Index.

Diversification Opportunities for LH Hotel and SET50 Index

-0.7

Correlation Coefficient

LH Hotel  SET50 Index

Excellent diversification

The 3 months correlation between LHHOTEL and SET50 is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding LH Hotel Leasehold and SET50 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SET50 Index 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 SET50 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SET50 Index has no effect on the direction of LH Hotel i.e., LH Hotel and SET50 Index go up and down completely randomly.

Pair Corralation between LH Hotel and SET50 Index

Assuming the 90 days trading horizon LH Hotel Leasehold is expected to generate 0.71 times more return on investment than SET50 Index. However, LH Hotel Leasehold is 1.4 times less risky than SET50 Index. It trades about 0.11 of its potential returns per unit of risk. SET50 Index is currently generating about -0.23 per unit of risk. If you would invest  1,313  in LH Hotel Leasehold on December 30, 2024 and sell it today you would earn a total of  77.00  from holding LH Hotel Leasehold or generate 5.86% return on investment over 90 days.

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

LH Hotel Leasehold  vs.  SET50 Index

Pair Trading with LH Hotel and SET50 Index

The main advantage of trading using opposite LH Hotel and SET50 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LH Hotel position performs unexpectedly, SET50 Index 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 SET50 Index will offset losses from the drop in SET50 Index's long position.

The idea behind LH Hotel Leasehold and SET50 Index 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.