Correlation Between Royal Orchid and WHA Industrial

Can any of the company-specific risk be diversified away by investing in both Royal Orchid and WHA Industrial 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 Royal Orchid and WHA Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royal Orchid Hotel and WHA Industrial Leasehold, you can compare the effects of market volatilities on Royal Orchid and WHA Industrial 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 Royal Orchid with a short position of WHA Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and WHA Industrial.

Diversification Opportunities for Royal Orchid and WHA Industrial

0.49

Correlation Coefficient

Royal Orchid  WHA Industrial

Very weak diversification

The 3 months correlation between Royal and WHA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotel and WHA Industrial Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHA Industrial Leasehold and Royal Orchid 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 Royal Orchid Hotel are associated (or correlated) with WHA Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHA Industrial Leasehold has no effect on the direction of Royal Orchid i.e., Royal Orchid and WHA Industrial go up and down completely randomly.

Pair Corralation between Royal Orchid and WHA Industrial

Assuming the 90 days trading horizon Royal Orchid Hotel is expected to generate 1.55 times more return on investment than WHA Industrial. However, Royal Orchid is 1.55 times more volatile than WHA Industrial Leasehold. It trades about -0.05 of its potential returns per unit of risk. WHA Industrial Leasehold is currently generating about -0.1 per unit of risk. If you would invest  214.00  in Royal Orchid Hotel on December 22, 2024 and sell it today you would lose (22.00) from holding Royal Orchid Hotel or give up 10.28% of portfolio value over 90 days.

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

Royal Orchid Hotel  vs.  WHA Industrial Leasehold

Royal Orchid Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Orchid Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

WHA Industrial Leasehold

Risk-Adjusted Performance

Very Weak

Over the last 90 days WHA Industrial Leasehold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Royal Orchid and WHA Industrial

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

The idea behind Royal Orchid Hotel and WHA Industrial Leasehold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.