Correlation Between Chateau International and FarGlory Hotel

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

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

Diversification Opportunities for Chateau International and FarGlory Hotel

0.61

Correlation Coefficient

Chateau International  FarGlory Hotel

Poor diversification

The 3 months correlation between Chateau and FarGlory is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chateau International Developm and FarGlory Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarGlory Hotel and Chateau International 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 Chateau International Development are associated (or correlated) with FarGlory Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FarGlory Hotel has no effect on the direction of Chateau International i.e., Chateau International and FarGlory Hotel go up and down completely randomly.

Pair Corralation between Chateau International and FarGlory Hotel

Assuming the 90 days trading horizon Chateau International Development is expected to under-perform the FarGlory Hotel. In addition to that, Chateau International is 1.68 times more volatile than FarGlory Hotel Co. It trades about -0.19 of its total potential returns per unit of risk. FarGlory Hotel Co is currently generating about -0.16 per unit of volatility. If you would invest  2,810  in FarGlory Hotel Co on August 31, 2024 and sell it today you would lose (345.00) from holding FarGlory Hotel Co or give up 12.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Chateau International Developm  vs.  FarGlory Hotel Co

Chateau International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chateau International Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

FarGlory Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FarGlory Hotel Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chateau International and FarGlory Hotel

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

The idea behind Chateau International Development and FarGlory Hotel Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.