Correlation Between Shaanxi Broadcast and BTG Hotels

Can any of the company-specific risk be diversified away by investing in both Shaanxi Broadcast and BTG Hotels 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 Shaanxi Broadcast and BTG Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shaanxi Broadcast TV and BTG Hotels Group, you can compare the effects of market volatilities on Shaanxi Broadcast and BTG Hotels 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 Shaanxi Broadcast with a short position of BTG Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Broadcast and BTG Hotels.

Diversification Opportunities for Shaanxi Broadcast and BTG Hotels

0.92

Correlation Coefficient

Shaanxi Broadcast  BTG Hotels

Almost no diversification

The 3 months correlation between Shaanxi and BTG is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Broadcast TV and BTG Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTG Hotels Group and Shaanxi Broadcast 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 Shaanxi Broadcast TV are associated (or correlated) with BTG Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTG Hotels Group has no effect on the direction of Shaanxi Broadcast i.e., Shaanxi Broadcast and BTG Hotels go up and down completely randomly.

Pair Corralation between Shaanxi Broadcast and BTG Hotels

Assuming the 90 days trading horizon Shaanxi Broadcast TV is expected to under-perform the BTG Hotels. In addition to that, Shaanxi Broadcast is 1.39 times more volatile than BTG Hotels Group. It trades about -0.03 of its total potential returns per unit of risk. BTG Hotels Group is currently generating about -0.04 per unit of volatility. If you would invest  2,589  in BTG Hotels Group on September 14, 2024 and sell it today you would lose (999.00) from holding BTG Hotels Group or give up 38.59% of portfolio value over 90 days.

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

Shaanxi Broadcast TV  vs.  BTG Hotels Group

Shaanxi Broadcast

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Broadcast sustained solid returns over the last few months and may actually be approaching a breakup point.

BTG Hotels Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTG Hotels Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BTG Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shaanxi Broadcast and BTG Hotels

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

The idea behind Shaanxi Broadcast TV and BTG Hotels Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.