Correlation Between PPHE Hotel and Falcon Oil

Can any of the company-specific risk be diversified away by investing in both PPHE Hotel and Falcon Oil 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 PPHE Hotel and Falcon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PPHE Hotel Group and Falcon Oil Gas, you can compare the effects of market volatilities on PPHE Hotel and Falcon Oil 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 PPHE Hotel with a short position of Falcon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPHE Hotel and Falcon Oil.

Diversification Opportunities for PPHE Hotel and Falcon Oil

-0.07

Correlation Coefficient

PPHE Hotel  Falcon Oil

Good diversification

The 3 months correlation between PPHE and Falcon is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PPHE Hotel Group and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas and PPHE Hotel 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 PPHE Hotel Group are associated (or correlated) with Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of PPHE Hotel i.e., PPHE Hotel and Falcon Oil go up and down completely randomly.

Pair Corralation between PPHE Hotel and Falcon Oil

Assuming the 90 days trading horizon PPHE Hotel Group is expected to generate 0.47 times more return on investment than Falcon Oil. However, PPHE Hotel Group is 2.11 times less risky than Falcon Oil. It trades about 0.02 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about -0.02 per unit of risk. If you would invest  122,637  in PPHE Hotel Group on December 2, 2024 and sell it today you would earn a total of  8,363  from holding PPHE Hotel Group or generate 6.82% return on investment over 90 days.

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

PPHE Hotel Group  vs.  Falcon Oil Gas

PPHE Hotel Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE Hotel Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, PPHE Hotel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Falcon Oil Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Oil Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Falcon Oil exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PPHE Hotel and Falcon Oil

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

The idea behind PPHE Hotel Group and Falcon Oil Gas 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.