Correlation Between UNITED INVESTMENTS and CONSTANCE HOTELS

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

By analyzing existing cross correlation between UNITED INVESTMENTS LTD and CONSTANCE HOTELS SERVICES, you can compare the effects of market volatilities on UNITED INVESTMENTS and CONSTANCE 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 UNITED INVESTMENTS with a short position of CONSTANCE HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED INVESTMENTS and CONSTANCE HOTELS.

Diversification Opportunities for UNITED INVESTMENTS and CONSTANCE HOTELS

0.7

Correlation Coefficient

UNITED INVESTMENTS  CONSTANCE HOTELS

Poor diversification

The 3 months correlation between UNITED and CONSTANCE is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding UNITED INVESTMENTS LTD and CONSTANCE HOTELS SERVICES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTANCE HOTELS SERVICES and UNITED INVESTMENTS 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 UNITED INVESTMENTS LTD are associated (or correlated) with CONSTANCE HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTANCE HOTELS SERVICES has no effect on the direction of UNITED INVESTMENTS i.e., UNITED INVESTMENTS and CONSTANCE HOTELS go up and down completely randomly.

Pair Corralation between UNITED INVESTMENTS and CONSTANCE HOTELS

Assuming the 90 days trading horizon UNITED INVESTMENTS LTD is expected to generate 7.13 times more return on investment than CONSTANCE HOTELS. However, UNITED INVESTMENTS is 7.13 times more volatile than CONSTANCE HOTELS SERVICES. It trades about -0.03 of its potential returns per unit of risk. CONSTANCE HOTELS SERVICES is currently generating about -0.21 per unit of risk. If you would invest  330.00  in UNITED INVESTMENTS LTD on December 25, 2024 and sell it today you would lose (30.00) from holding UNITED INVESTMENTS LTD or give up 9.09% of portfolio value over 90 days.

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

UNITED INVESTMENTS LTD  vs.  CONSTANCE HOTELS SERVICES

UNITED INVESTMENTS LTD

Risk-Adjusted Performance

Very Weak

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

CONSTANCE HOTELS SERVICES

Risk-Adjusted Performance

Very Weak

Over the last 90 days CONSTANCE HOTELS SERVICES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with UNITED INVESTMENTS and CONSTANCE HOTELS

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

The idea behind UNITED INVESTMENTS LTD and CONSTANCE HOTELS SERVICES 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .