Correlation Between Quality Construction and Grande Hospitality

Can any of the company-specific risk be diversified away by investing in both Quality Construction and Grande Hospitality 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 Quality Construction and Grande Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quality Construction Products and Grande Hospitality Real, you can compare the effects of market volatilities on Quality Construction and Grande Hospitality 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 Quality Construction with a short position of Grande Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quality Construction and Grande Hospitality.

Diversification Opportunities for Quality Construction and Grande Hospitality

0.26

Correlation Coefficient

Quality Construction  Grande Hospitality

Modest diversification

The 3 months correlation between Quality and Grande is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Quality Construction Products and Grande Hospitality Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grande Hospitality Real and Quality Construction 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 Quality Construction Products are associated (or correlated) with Grande Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grande Hospitality Real has no effect on the direction of Quality Construction i.e., Quality Construction and Grande Hospitality go up and down completely randomly.

Pair Corralation between Quality Construction and Grande Hospitality

Assuming the 90 days trading horizon Quality Construction Products is expected to under-perform the Grande Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Quality Construction Products is 1.08 times less risky than Grande Hospitality. The stock trades about -0.07 of its potential returns per unit of risk. The Grande Hospitality Real is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  665.00  in Grande Hospitality Real on December 4, 2024 and sell it today you would earn a total of  15.00  from holding Grande Hospitality Real or generate 2.26% return on investment over 90 days.

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

Quality Construction Products  vs.  Grande Hospitality Real

Quality Construction

Risk-Adjusted Performance

Very Weak

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

Grande Hospitality Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grande Hospitality Real are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grande Hospitality is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Quality Construction and Grande Hospitality

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

The idea behind Quality Construction Products and Grande Hospitality Real 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 Global Correlations module to find global opportunities by holding instruments from different markets.