Correlation Between CAP LEASE and PPHE Hotel

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

By analyzing existing cross correlation between CAP LEASE AVIATION and PPHE Hotel Group, you can compare the effects of market volatilities on CAP LEASE and PPHE Hotel 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 CAP LEASE with a short position of PPHE Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and PPHE Hotel.

Diversification Opportunities for CAP LEASE and PPHE Hotel

-0.36

Correlation Coefficient

CAP LEASE  PPHE Hotel

Very good diversification

The 3 months correlation between CAP and PPHE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group and CAP LEASE 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 CAP LEASE AVIATION are associated (or correlated) with PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of CAP LEASE i.e., CAP LEASE and PPHE Hotel go up and down completely randomly.

Pair Corralation between CAP LEASE and PPHE Hotel

Assuming the 90 days trading horizon CAP LEASE is expected to generate 89.78 times less return on investment than PPHE Hotel. But when comparing it to its historical volatility, CAP LEASE AVIATION is 1.58 times less risky than PPHE Hotel. It trades about 0.01 of its potential returns per unit of risk. PPHE Hotel Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  118,000  in PPHE Hotel Group on September 22, 2024 and sell it today you would earn a total of  18,500  from holding PPHE Hotel Group or generate 15.68% return on investment over 90 days.

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

CAP LEASE AVIATION  vs.  PPHE Hotel Group

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PPHE Hotel Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE Hotel Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, PPHE Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CAP LEASE and PPHE Hotel

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

The idea behind CAP LEASE AVIATION and PPHE Hotel 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.

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 Stocks Directory module to find actively traded stocks across global markets.