Correlation Between Morgan Advanced and PPHE Hotel

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

By analyzing existing cross correlation between Morgan Advanced Materials and PPHE Hotel Group, you can compare the effects of market volatilities on Morgan Advanced and PPHE Hotel 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 Morgan Advanced with a short position of PPHE Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Advanced and PPHE Hotel.

Diversification Opportunities for Morgan Advanced and PPHE Hotel

0.63

Correlation Coefficient

Morgan Advanced  PPHE Hotel

Poor diversification

The 3 months correlation between Morgan and PPHE is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Advanced Materials and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group and Morgan Advanced 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 Morgan Advanced Materials are associated (or correlated) with PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of Morgan Advanced i.e., Morgan Advanced and PPHE Hotel go up and down completely randomly.

Pair Corralation between Morgan Advanced and PPHE Hotel

Assuming the 90 days trading horizon Morgan Advanced is expected to generate 5.69 times less return on investment than PPHE Hotel. But when comparing it to its historical volatility, Morgan Advanced Materials is 1.71 times less risky than PPHE Hotel. It trades about 0.17 of its potential returns per unit of risk. PPHE Hotel Group is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  130,500  in PPHE Hotel Group on October 9, 2024 and sell it today you would earn a total of  11,500  from holding PPHE Hotel Group or generate 8.81% return on investment over 90 days.

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

Morgan Advanced Materials  vs.  PPHE Hotel Group

Morgan Advanced Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Advanced Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Morgan Advanced is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PPHE Hotel Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE Hotel Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, PPHE Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Advanced and PPHE Hotel

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

The idea behind Morgan Advanced Materials and PPHE Hotel 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.