Correlation Between Aeon Credit and YTL Hospitality

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

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

Diversification Opportunities for Aeon Credit and YTL Hospitality

0.51

Correlation Coefficient

Aeon Credit  YTL Hospitality

Very weak diversification

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

Pair Corralation between Aeon Credit and YTL Hospitality

Assuming the 90 days trading horizon Aeon Credit Service is expected to under-perform the YTL Hospitality. In addition to that, Aeon Credit is 1.24 times more volatile than YTL Hospitality REIT. It trades about -0.21 of its total potential returns per unit of risk. YTL Hospitality REIT is currently generating about -0.01 per unit of volatility. 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

Aeon Credit Service  vs.  YTL Hospitality REIT

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.

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.

Pair Trading with Aeon Credit and YTL Hospitality

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

The idea behind Aeon Credit Service and YTL Hospitality REIT 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.