Correlation Between Palm Garden and Sanasa Development

Can any of the company-specific risk be diversified away by investing in both Palm Garden and Sanasa Development 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 Sanasa Development 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 Sanasa Development Bank, you can compare the effects of market volatilities on Palm Garden and Sanasa Development 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 Sanasa Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palm Garden and Sanasa Development.

Diversification Opportunities for Palm Garden and Sanasa Development

0.76

Correlation Coefficient

Palm Garden  Sanasa Development

Poor diversification

The 3 months correlation between Palm and Sanasa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Palm Garden Hotels and Sanasa Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanasa Development Bank 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 Sanasa Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanasa Development Bank has no effect on the direction of Palm Garden i.e., Palm Garden and Sanasa Development go up and down completely randomly.

Pair Corralation between Palm Garden and Sanasa Development

Assuming the 90 days trading horizon Palm Garden Hotels is expected to generate 1.05 times more return on investment than Sanasa Development. However, Palm Garden is 1.05 times more volatile than Sanasa Development Bank. It trades about -0.05 of its potential returns per unit of risk. Sanasa Development Bank is currently generating about -0.06 per unit of risk. If you would invest  7,520  in Palm Garden Hotels on December 25, 2024 and sell it today you would lose (840.00) from holding Palm Garden Hotels or give up 11.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.21%
Values	Daily Returns

Palm Garden Hotels  vs.  Sanasa Development Bank

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sanasa Development Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sanasa Development Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Palm Garden and Sanasa Development

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

The idea behind Palm Garden Hotels and Sanasa Development Bank 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 Stocks Directory module to find actively traded stocks across global markets.