Correlation Between Royal Orchid and Hathway Cable

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

By analyzing existing cross correlation between Royal Orchid Hotels and Hathway Cable Datacom, you can compare the effects of market volatilities on Royal Orchid and Hathway Cable 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 Hathway Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Hathway Cable.

Diversification Opportunities for Royal Orchid and Hathway Cable

-0.48

Correlation Coefficient

Royal Orchid  Hathway Cable

Very good diversification

The 3 months correlation between Royal and Hathway is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels and Hathway Cable Datacom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hathway Cable Datacom 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 Hotels are associated (or correlated) with Hathway Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hathway Cable Datacom has no effect on the direction of Royal Orchid i.e., Royal Orchid and Hathway Cable go up and down completely randomly.

Pair Corralation between Royal Orchid and Hathway Cable

Assuming the 90 days trading horizon Royal Orchid Hotels is expected to generate 1.41 times more return on investment than Hathway Cable. However, Royal Orchid is 1.41 times more volatile than Hathway Cable Datacom. It trades about 0.06 of its potential returns per unit of risk. Hathway Cable Datacom is currently generating about -0.1 per unit of risk. If you would invest  35,415  in Royal Orchid Hotels on December 30, 2024 and sell it today you would earn a total of  3,610  from holding Royal Orchid Hotels or generate 10.19% return on investment over 90 days.

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

Royal Orchid Hotels  vs.  Hathway Cable Datacom

Royal Orchid Hotels

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Royal Orchid sustained solid returns over the last few months and may actually be approaching a breakup point.

Hathway Cable Datacom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hathway Cable Datacom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Royal Orchid and Hathway Cable

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

The idea behind Royal Orchid Hotels and Hathway Cable Datacom 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.