Correlation Between Royal Orchid and Juniper Hotels

Can any of the company-specific risk be diversified away by investing in both Royal Orchid and Juniper 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 Royal Orchid and Juniper Hotels 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 Juniper Hotels, you can compare the effects of market volatilities on Royal Orchid and Juniper 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 Royal Orchid with a short position of Juniper Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Juniper Hotels.

Diversification Opportunities for Royal Orchid and Juniper Hotels

0.62

Correlation Coefficient

Royal Orchid  Juniper Hotels

Poor diversification

The 3 months correlation between Royal and Juniper is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels and Juniper Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juniper Hotels 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 Juniper Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juniper Hotels has no effect on the direction of Royal Orchid i.e., Royal Orchid and Juniper Hotels go up and down completely randomly.

Pair Corralation between Royal Orchid and Juniper Hotels

Assuming the 90 days trading horizon Royal Orchid Hotels is expected to generate 1.04 times more return on investment than Juniper Hotels. However, Royal Orchid is 1.04 times more volatile than Juniper Hotels. It trades about 0.04 of its potential returns per unit of risk. Juniper Hotels is currently generating about -0.01 per unit of risk. If you would invest  24,577  in Royal Orchid Hotels on October 3, 2024 and sell it today you would earn a total of  11,028  from holding Royal Orchid Hotels or generate 44.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	43.09%
Values	Daily Returns

Royal Orchid Hotels  vs.  Juniper Hotels

Royal Orchid Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Orchid Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Royal Orchid is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Juniper Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Juniper Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Juniper Hotels is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Royal Orchid and Juniper Hotels

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

The idea behind Royal Orchid Hotels and Juniper Hotels 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.