Correlation Between Light Wonder and GreenTree Hospitality

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

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

Diversification Opportunities for Light Wonder and GreenTree Hospitality

0.69

Correlation Coefficient

Light Wonder  GreenTree Hospitality

Poor diversification

The 3 months correlation between Light and GreenTree is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and GreenTree Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenTree Hospitality and Light Wonder 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 Light Wonder are associated (or correlated) with GreenTree Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenTree Hospitality has no effect on the direction of Light Wonder i.e., Light Wonder and GreenTree Hospitality go up and down completely randomly.

Pair Corralation between Light Wonder and GreenTree Hospitality

Considering the 90-day investment horizon Light Wonder is expected to generate 1.15 times more return on investment than GreenTree Hospitality. However, Light Wonder is 1.15 times more volatile than GreenTree Hospitality Group. It trades about 0.38 of its potential returns per unit of risk. GreenTree Hospitality Group is currently generating about 0.07 per unit of risk. If you would invest  8,534  in Light Wonder on December 4, 2024 and sell it today you would earn a total of  2,431  from holding Light Wonder or generate 28.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Light Wonder  vs.  GreenTree Hospitality Group

Light Wonder

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Light Wonder are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Light Wonder may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GreenTree Hospitality

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GreenTree Hospitality Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, GreenTree Hospitality is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Light Wonder and GreenTree Hospitality

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

The idea behind Light Wonder and GreenTree Hospitality Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .