Correlation Between Quality Hospitality and North East

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

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

Diversification Opportunities for Quality Hospitality and North East

-0.25

Correlation Coefficient

Quality Hospitality  North East

Very good diversification

The 3 months correlation between Quality and North is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Quality Hospitality Leasehold and North East Rubbers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North East Rubbers and Quality Hospitality 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 Hospitality Leasehold are associated (or correlated) with North East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North East Rubbers has no effect on the direction of Quality Hospitality i.e., Quality Hospitality and North East go up and down completely randomly.

Pair Corralation between Quality Hospitality and North East

Assuming the 90 days trading horizon Quality Hospitality Leasehold is expected to under-perform the North East. In addition to that, Quality Hospitality is 1.42 times more volatile than North East Rubbers. It trades about -0.03 of its total potential returns per unit of risk. North East Rubbers is currently generating about 0.06 per unit of volatility. If you would invest  466.00  in North East Rubbers on December 23, 2024 and sell it today you would earn a total of  26.00  from holding North East Rubbers or generate 5.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Quality Hospitality Leasehold  vs.  North East Rubbers

Quality Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Hospitality Leasehold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Quality Hospitality is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

North East Rubbers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North East Rubbers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, North East is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Quality Hospitality and North East

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

The idea behind Quality Hospitality Leasehold and North East Rubbers 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.