Correlation Between Palm Garden and Asian Hotels

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

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

Diversification Opportunities for Palm Garden and Asian Hotels

0.35

Correlation Coefficient

Palm Garden  Asian Hotels

Weak diversification

The 3 months correlation between Palm and Asian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Palm Garden Hotels and Asian Hotels and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels and Palm Garden 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 Palm Garden Hotels are associated (or correlated) with Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels has no effect on the direction of Palm Garden i.e., Palm Garden and Asian Hotels go up and down completely randomly.

Pair Corralation between Palm Garden and Asian Hotels

Assuming the 90 days trading horizon Palm Garden Hotels is expected to generate 1.94 times more return on investment than Asian Hotels. However, Palm Garden is 1.94 times more volatile than Asian Hotels and. It trades about 0.0 of its potential returns per unit of risk. Asian Hotels and is currently generating about -0.19 per unit of risk. If you would invest  7,520  in Palm Garden Hotels on December 26, 2024 and sell it today you would lose (270.00) from holding Palm Garden Hotels or give up 3.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

Palm Garden Hotels  vs.  Asian Hotels and

Palm Garden Hotels

Risk-Adjusted Performance

Very Weak

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

Asian Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asian Hotels and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Palm Garden and Asian Hotels

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

The idea behind Palm Garden Hotels and Asian Hotels and 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.