Correlation Between Oriental Hotels and Global Health

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

Diversification Opportunities for Oriental Hotels and Global Health

-0.32

Correlation Coefficient

Oriental Hotels  Global Health

Very good diversification

The 3 months correlation between Oriental and Global is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Hotels Limited and Global Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health Limited has no effect on the direction of Oriental Hotels i.e., Oriental Hotels and Global Health go up and down completely randomly.

Pair Corralation between Oriental Hotels and Global Health

Assuming the 90 days trading horizon Oriental Hotels Limited is expected to generate 1.8 times more return on investment than Global Health. However, Oriental Hotels is 1.8 times more volatile than Global Health Limited. It trades about 0.09 of its potential returns per unit of risk. Global Health Limited is currently generating about -0.03 per unit of risk. If you would invest  15,733  in Oriental Hotels Limited on September 4, 2024 and sell it today you would earn a total of  2,376  from holding Oriental Hotels Limited or generate 15.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Oriental Hotels Limited  vs.  Global Health Limited

Oriental Hotels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Hotels Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, Oriental Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Global Health Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Health Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Global Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oriental Hotels and Global Health

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

The idea behind Oriental Hotels Limited and Global Health 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.