Correlation Between Primary Health and Scandic Hotels

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

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

Diversification Opportunities for Primary Health and Scandic Hotels

0.47

Correlation Coefficient

Primary Health  Scandic Hotels

Very weak diversification

The 3 months correlation between Primary and Scandic is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group and Primary Health 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 Primary Health Properties are associated (or correlated) with Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Primary Health i.e., Primary Health and Scandic Hotels go up and down completely randomly.

Pair Corralation between Primary Health and Scandic Hotels

Assuming the 90 days trading horizon Primary Health Properties is expected to under-perform the Scandic Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Primary Health Properties is 1.58 times less risky than Scandic Hotels. The stock trades about -0.18 of its potential returns per unit of risk. The Scandic Hotels Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,488  in Scandic Hotels Group on September 29, 2024 and sell it today you would earn a total of  327.00  from holding Scandic Hotels Group or generate 5.04% return on investment over 90 days.

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

Primary Health Properties  vs.  Scandic Hotels Group

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Scandic Hotels Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scandic Hotels Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Scandic Hotels is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Primary Health and Scandic Hotels

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

The idea behind Primary Health Properties and Scandic Hotels Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.