Correlation Between SUNBIRD HOTELS and TELEKOM NETWORK

Can any of the company-specific risk be diversified away by investing in both SUNBIRD HOTELS and TELEKOM NETWORK 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 SUNBIRD HOTELS and TELEKOM NETWORK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SUNBIRD HOTELS TOURISM and TELEKOM NETWORK MALAWI, you can compare the effects of market volatilities on SUNBIRD HOTELS and TELEKOM NETWORK 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 SUNBIRD HOTELS with a short position of TELEKOM NETWORK. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUNBIRD HOTELS and TELEKOM NETWORK.

Diversification Opportunities for SUNBIRD HOTELS and TELEKOM NETWORK

-0.23

Correlation Coefficient

SUNBIRD HOTELS  TELEKOM NETWORK

Very good diversification

The 3 months correlation between SUNBIRD and TELEKOM is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SUNBIRD HOTELS TOURISM and TELEKOM NETWORK MALAWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELEKOM NETWORK MALAWI and SUNBIRD HOTELS 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 SUNBIRD HOTELS TOURISM are associated (or correlated) with TELEKOM NETWORK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELEKOM NETWORK MALAWI has no effect on the direction of SUNBIRD HOTELS i.e., SUNBIRD HOTELS and TELEKOM NETWORK go up and down completely randomly.

Pair Corralation between SUNBIRD HOTELS and TELEKOM NETWORK

Assuming the 90 days trading horizon SUNBIRD HOTELS TOURISM is expected to generate 1.01 times more return on investment than TELEKOM NETWORK. However, SUNBIRD HOTELS is 1.01 times more volatile than TELEKOM NETWORK MALAWI. It trades about 0.23 of its potential returns per unit of risk. TELEKOM NETWORK MALAWI is currently generating about -0.35 per unit of risk. If you would invest  24,008  in SUNBIRD HOTELS TOURISM on October 26, 2024 and sell it today you would earn a total of  3,604  from holding SUNBIRD HOTELS TOURISM or generate 15.01% return on investment over 90 days.

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

SUNBIRD HOTELS TOURISM  vs.  TELEKOM NETWORK MALAWI

SUNBIRD HOTELS TOURISM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SUNBIRD HOTELS TOURISM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, SUNBIRD HOTELS exhibited solid returns over the last few months and may actually be approaching a breakup point.

TELEKOM NETWORK MALAWI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELEKOM NETWORK MALAWI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TELEKOM NETWORK is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SUNBIRD HOTELS and TELEKOM NETWORK

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

The idea behind SUNBIRD HOTELS TOURISM and TELEKOM NETWORK MALAWI 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.