Correlation Between Jinling Hotel and Guangzhou Dongfang

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

By analyzing existing cross correlation between Jinling Hotel Corp and Guangzhou Dongfang Hotel, you can compare the effects of market volatilities on Jinling Hotel and Guangzhou Dongfang 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 Jinling Hotel with a short position of Guangzhou Dongfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinling Hotel and Guangzhou Dongfang.

Diversification Opportunities for Jinling Hotel and Guangzhou Dongfang

0.91

Correlation Coefficient

Jinling Hotel  Guangzhou Dongfang

Almost no diversification

The 3 months correlation between Jinling and Guangzhou is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Jinling Hotel Corp and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel and Jinling Hotel 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 Jinling Hotel Corp are associated (or correlated) with Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Jinling Hotel i.e., Jinling Hotel and Guangzhou Dongfang go up and down completely randomly.

Pair Corralation between Jinling Hotel and Guangzhou Dongfang

Assuming the 90 days trading horizon Jinling Hotel is expected to generate 1.31 times less return on investment than Guangzhou Dongfang. But when comparing it to its historical volatility, Jinling Hotel Corp is 1.11 times less risky than Guangzhou Dongfang. It trades about 0.03 of its potential returns per unit of risk. Guangzhou Dongfang Hotel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  940.00  in Guangzhou Dongfang Hotel on September 27, 2024 and sell it today you would earn a total of  44.00  from holding Guangzhou Dongfang Hotel or generate 4.68% return on investment over 90 days.

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

Jinling Hotel Corp  vs.  Guangzhou Dongfang Hotel

Jinling Hotel Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jinling Hotel Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jinling Hotel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou Dongfang Hotel

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Dongfang Hotel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Dongfang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jinling Hotel and Guangzhou Dongfang

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

The idea behind Jinling Hotel Corp and Guangzhou Dongfang Hotel 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..