Correlation Between Tangerine Beach and HNB Finance

Can any of the company-specific risk be diversified away by investing in both Tangerine Beach and HNB Finance 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 Tangerine Beach and HNB Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tangerine Beach Hotels and HNB Finance, you can compare the effects of market volatilities on Tangerine Beach and HNB Finance 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 Tangerine Beach with a short position of HNB Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tangerine Beach and HNB Finance.

Diversification Opportunities for Tangerine Beach and HNB Finance

-0.46

Correlation Coefficient

Tangerine Beach  HNB Finance

Very good diversification

The 3 months correlation between Tangerine and HNB is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Tangerine Beach Hotels and HNB Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNB Finance and Tangerine Beach 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 Tangerine Beach Hotels are associated (or correlated) with HNB Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNB Finance has no effect on the direction of Tangerine Beach i.e., Tangerine Beach and HNB Finance go up and down completely randomly.

Pair Corralation between Tangerine Beach and HNB Finance

Assuming the 90 days trading horizon Tangerine Beach Hotels is expected to generate 0.65 times more return on investment than HNB Finance. However, Tangerine Beach Hotels is 1.54 times less risky than HNB Finance. It trades about 0.13 of its potential returns per unit of risk. HNB Finance is currently generating about -0.04 per unit of risk. If you would invest  6,080  in Tangerine Beach Hotels on September 15, 2024 and sell it today you would earn a total of  1,220  from holding Tangerine Beach Hotels or generate 20.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Tangerine Beach Hotels  vs.  HNB Finance

Tangerine Beach Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Beach Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tangerine Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

HNB Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators 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 Tangerine Beach and HNB Finance

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

The idea behind Tangerine Beach Hotels and HNB Finance 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.