Correlation Between YTL Hospitality and Aeon Credit

Can any of the company-specific risk be diversified away by investing in both YTL Hospitality and Aeon Credit 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 YTL Hospitality and Aeon Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YTL Hospitality REIT and Aeon Credit Service, you can compare the effects of market volatilities on YTL Hospitality and Aeon Credit 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 YTL Hospitality with a short position of Aeon Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of YTL Hospitality and Aeon Credit.

Diversification Opportunities for YTL Hospitality and Aeon Credit

0.51

Correlation Coefficient

YTL Hospitality  Aeon Credit

Very weak diversification

The 3 months correlation between YTL and Aeon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding YTL Hospitality REIT and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service and YTL Hospitality 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 YTL Hospitality REIT are associated (or correlated) with Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of YTL Hospitality i.e., YTL Hospitality and Aeon Credit go up and down completely randomly.

Pair Corralation between YTL Hospitality and Aeon Credit

Assuming the 90 days trading horizon YTL Hospitality REIT is expected to generate 0.81 times more return on investment than Aeon Credit. However, YTL Hospitality REIT is 1.24 times less risky than Aeon Credit. It trades about -0.01 of its potential returns per unit of risk. Aeon Credit Service is currently generating about -0.21 per unit of risk. If you would invest  120.00  in YTL Hospitality REIT on September 26, 2024 and sell it today you would lose (1.00) from holding YTL Hospitality REIT or give up 0.83% of portfolio value over 90 days.

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

YTL Hospitality REIT  vs.  Aeon Credit Service

YTL Hospitality REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YTL Hospitality REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, YTL Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with YTL Hospitality and Aeon Credit

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

The idea behind YTL Hospitality REIT and Aeon Credit Service 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.