Correlation Between AAA Technologies and Oriental Hotels

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

By analyzing existing cross correlation between AAA Technologies Limited and Oriental Hotels Limited, you can compare the effects of market volatilities on AAA Technologies and Oriental 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 AAA Technologies with a short position of Oriental Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAA Technologies and Oriental Hotels.

Diversification Opportunities for AAA Technologies and Oriental Hotels

-0.41

Correlation Coefficient

AAA Technologies  Oriental Hotels

Very good diversification

The 3 months correlation between AAA and Oriental is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding AAA Technologies Limited and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and AAA Technologies 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 AAA Technologies Limited are associated (or correlated) with Oriental Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Hotels has no effect on the direction of AAA Technologies i.e., AAA Technologies and Oriental Hotels go up and down completely randomly.

Pair Corralation between AAA Technologies and Oriental Hotels

Assuming the 90 days trading horizon AAA Technologies is expected to generate 6.93 times less return on investment than Oriental Hotels. But when comparing it to its historical volatility, AAA Technologies Limited is 1.63 times less risky than Oriental Hotels. It trades about 0.02 of its potential returns per unit of risk. Oriental Hotels Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17,832  in Oriental Hotels Limited on September 21, 2024 and sell it today you would earn a total of  715.00  from holding Oriental Hotels Limited or generate 4.01% return on investment over 90 days.

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

AAA Technologies Limited  vs.  Oriental Hotels Limited

AAA Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Oriental Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with AAA Technologies and Oriental Hotels

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

The idea behind AAA Technologies Limited and Oriental Hotels Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.