Correlation Between Hotel Holiday and FDC International

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

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

Diversification Opportunities for Hotel Holiday and FDC International

-0.1

Correlation Coefficient

Hotel Holiday  FDC International

Good diversification

The 3 months correlation between Hotel and FDC is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Holiday Garden and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Hotel Holiday 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 Hotel Holiday Garden are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Hotel Holiday i.e., Hotel Holiday and FDC International go up and down completely randomly.

Pair Corralation between Hotel Holiday and FDC International

Assuming the 90 days trading horizon Hotel Holiday Garden is expected to under-perform the FDC International. But the stock apears to be less risky and, when comparing its historical volatility, Hotel Holiday Garden is 2.02 times less risky than FDC International. The stock trades about -0.41 of its potential returns per unit of risk. The FDC International Hotels is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  5,770  in FDC International Hotels on September 13, 2024 and sell it today you would earn a total of  480.00  from holding FDC International Hotels or generate 8.32% return on investment over 90 days.

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

Hotel Holiday Garden  vs.  FDC International Hotels

Hotel Holiday Garden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Holiday Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hotel Holiday is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FDC International Hotels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FDC International Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FDC International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hotel Holiday and FDC International

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

The idea behind Hotel Holiday Garden and FDC International 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.