Correlation Between Quality Houses and Sawang Export

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

By analyzing existing cross correlation between Quality Houses Hotel and Sawang Export Public, you can compare the effects of market volatilities on Quality Houses and Sawang Export 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 Houses with a short position of Sawang Export. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quality Houses and Sawang Export.

Diversification Opportunities for Quality Houses and Sawang Export

0.63

Correlation Coefficient

Quality Houses  Sawang Export

Poor diversification

The 3 months correlation between Quality and Sawang is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Quality Houses Hotel and Sawang Export Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawang Export Public and Quality Houses 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 Houses Hotel are associated (or correlated) with Sawang Export. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawang Export Public has no effect on the direction of Quality Houses i.e., Quality Houses and Sawang Export go up and down completely randomly.

Pair Corralation between Quality Houses and Sawang Export

Assuming the 90 days trading horizon Quality Houses is expected to generate 1.12 times less return on investment than Sawang Export. In addition to that, Quality Houses is 1.01 times more volatile than Sawang Export Public. It trades about 0.1 of its total potential returns per unit of risk. Sawang Export Public is currently generating about 0.11 per unit of volatility. If you would invest  1,270  in Sawang Export Public on August 31, 2024 and sell it today you would lose (60.00) from holding Sawang Export Public or give up 4.72% of portfolio value over 90 days.

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

Quality Houses Hotel  vs.  Sawang Export Public

Quality Houses Hotel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Houses Hotel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Quality Houses disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sawang Export Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sawang Export Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sawang Export sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quality Houses and Sawang Export

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

The idea behind Quality Houses Hotel and Sawang Export Public 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.