Correlation Between Wharf Holdings and Holiday Island

Can any of the company-specific risk be diversified away by investing in both Wharf Holdings and Holiday Island 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 Wharf Holdings and Holiday Island into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wharf Holdings and Holiday Island Holdings, you can compare the effects of market volatilities on Wharf Holdings and Holiday Island 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 Wharf Holdings with a short position of Holiday Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wharf Holdings and Holiday Island.

Diversification Opportunities for Wharf Holdings and Holiday Island

0.46

Correlation Coefficient

Wharf Holdings  Holiday Island

Very weak diversification

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

Pair Corralation between Wharf Holdings and Holiday Island

Assuming the 90 days horizon Wharf Holdings is expected to generate 54.05 times less return on investment than Holiday Island. But when comparing it to its historical volatility, Wharf Holdings is 12.94 times less risky than Holiday Island. It trades about 0.02 of its potential returns per unit of risk. Holiday Island Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.42  in Holiday Island Holdings on December 1, 2024 and sell it today you would earn a total of  0.56  from holding Holiday Island Holdings or generate 133.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.17%
Values	Daily Returns

Wharf Holdings  vs.  Holiday Island Holdings

Wharf Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wharf Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Holiday Island Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holiday Island Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Wharf Holdings and Holiday Island

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

The idea behind Wharf Holdings and Holiday Island Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.