Correlation Between QUALITY BEVERAGES and CONSTANCE HOTELS

Can any of the company-specific risk be diversified away by investing in both QUALITY BEVERAGES and CONSTANCE 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 QUALITY BEVERAGES and CONSTANCE HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between QUALITY BEVERAGES LTD and CONSTANCE HOTELS SERVICES, you can compare the effects of market volatilities on QUALITY BEVERAGES and CONSTANCE 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 QUALITY BEVERAGES with a short position of CONSTANCE HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of QUALITY BEVERAGES and CONSTANCE HOTELS.

Diversification Opportunities for QUALITY BEVERAGES and CONSTANCE HOTELS

0.07

Correlation Coefficient

QUALITY BEVERAGES  CONSTANCE HOTELS

Significant diversification

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

Pair Corralation between QUALITY BEVERAGES and CONSTANCE HOTELS

Assuming the 90 days trading horizon QUALITY BEVERAGES LTD is expected to generate 1.5 times more return on investment than CONSTANCE HOTELS. However, QUALITY BEVERAGES is 1.5 times more volatile than CONSTANCE HOTELS SERVICES. It trades about 0.0 of its potential returns per unit of risk. CONSTANCE HOTELS SERVICES is currently generating about -0.01 per unit of risk. If you would invest  1,130  in QUALITY BEVERAGES LTD on October 7, 2024 and sell it today you would lose (55.00) from holding QUALITY BEVERAGES LTD or give up 4.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.3%
Values	Daily Returns

QUALITY BEVERAGES LTD  vs.  CONSTANCE HOTELS SERVICES

QUALITY BEVERAGES LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QUALITY BEVERAGES LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, QUALITY BEVERAGES is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

CONSTANCE HOTELS SERVICES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTANCE HOTELS SERVICES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CONSTANCE HOTELS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with QUALITY BEVERAGES and CONSTANCE HOTELS

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

The idea behind QUALITY BEVERAGES LTD and CONSTANCE HOTELS SERVICES 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.