Correlation Between Oriental Hotels and Zota Health

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

Diversification Opportunities for Oriental Hotels and Zota Health

0.09

Correlation Coefficient

Oriental Hotels  Zota Health

Significant diversification

The 3 months correlation between Oriental and Zota is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Hotels Limited and Zota Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zota Health Care 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 Zota Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zota Health Care has no effect on the direction of Oriental Hotels i.e., Oriental Hotels and Zota Health go up and down completely randomly.

Pair Corralation between Oriental Hotels and Zota Health

Assuming the 90 days trading horizon Oriental Hotels is expected to generate 3.64 times less return on investment than Zota Health. In addition to that, Oriental Hotels is 1.11 times more volatile than Zota Health Care. It trades about 0.05 of its total potential returns per unit of risk. Zota Health Care is currently generating about 0.21 per unit of volatility. If you would invest  58,790  in Zota Health Care on October 5, 2024 and sell it today you would earn a total of  21,455  from holding Zota Health Care or generate 36.49% return on investment over 90 days.

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

Oriental Hotels Limited  vs.  Zota Health Care

Oriental Hotels

Risk-Adjusted Performance

4 of 100

Weak

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 unsteady technical indicators, Oriental Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zota Health Care

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zota Health Care are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Zota Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oriental Hotels and Zota Health

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

The idea behind Oriental Hotels Limited and Zota Health Care 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.