Correlation Between Next Mediaworks and Oriental Hotels

Can any of the company-specific risk be diversified away by investing in both Next Mediaworks and Oriental Hotels 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 Next Mediaworks and Oriental Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Next Mediaworks and Oriental Hotels

0.71

Correlation Coefficient

Next Mediaworks  Oriental Hotels

Poor diversification

The 3 months correlation between Next and Oriental is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Next Mediaworks Limited and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and Next Mediaworks 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 Next Mediaworks Limited are associated (or correlated) with Oriental Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Hotels has no effect on the direction of Next Mediaworks i.e., Next Mediaworks and Oriental Hotels go up and down completely randomly.

Pair Corralation between Next Mediaworks and Oriental Hotels

Assuming the 90 days trading horizon Next Mediaworks is expected to generate 1.92 times less return on investment than Oriental Hotels. In addition to that, Next Mediaworks is 1.29 times more volatile than Oriental Hotels Limited. It trades about 0.03 of its total potential returns per unit of risk. Oriental Hotels Limited is currently generating about 0.08 per unit of volatility. If you would invest  6,678  in Oriental Hotels Limited on October 25, 2024 and sell it today you would earn a total of  9,012  from holding Oriental Hotels Limited or generate 134.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Next Mediaworks Limited  vs.  Oriental Hotels Limited

Next Mediaworks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Next Mediaworks Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Next Mediaworks may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Oriental Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Oriental Hotels is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Next Mediaworks and Oriental Hotels

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

The idea behind Next Mediaworks Limited and Oriental Hotels Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.