Correlation Between Oriental Hotels and HMT

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

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

Diversification Opportunities for Oriental Hotels and HMT

-0.05

Correlation Coefficient

Oriental Hotels  HMT

Good diversification

The 3 months correlation between Oriental and HMT is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Hotels Limited and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited and Oriental Hotels 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 Oriental Hotels Limited are associated (or correlated) with HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Oriental Hotels i.e., Oriental Hotels and HMT go up and down completely randomly.

Pair Corralation between Oriental Hotels and HMT

Assuming the 90 days trading horizon Oriental Hotels Limited is expected to generate 1.13 times more return on investment than HMT. However, Oriental Hotels is 1.13 times more volatile than HMT Limited. It trades about 0.06 of its potential returns per unit of risk. HMT Limited is currently generating about -0.02 per unit of risk. If you would invest  16,114  in Oriental Hotels Limited on October 23, 2024 and sell it today you would earn a total of  1,309  from holding Oriental Hotels Limited or generate 8.12% return on investment over 90 days.

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

Oriental Hotels Limited  vs.  HMT Limited

Oriental Hotels

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Hotels Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Oriental Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HMT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Oriental Hotels and HMT

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

The idea behind Oriental Hotels Limited and HMT 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.