Correlation Between Dan Hotels and Israel China

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

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

Diversification Opportunities for Dan Hotels and Israel China

0.34

Correlation Coefficient

Dan Hotels  Israel China

Weak diversification

The 3 months correlation between Dan and Israel is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dan Hotels and Israel China Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel China Biotech and Dan Hotels 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 Dan Hotels are associated (or correlated) with Israel China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel China Biotech has no effect on the direction of Dan Hotels i.e., Dan Hotels and Israel China go up and down completely randomly.

Pair Corralation between Dan Hotels and Israel China

Assuming the 90 days trading horizon Dan Hotels is expected to generate 0.59 times more return on investment than Israel China. However, Dan Hotels is 1.7 times less risky than Israel China. It trades about 0.03 of its potential returns per unit of risk. Israel China Biotechnology is currently generating about -0.03 per unit of risk. If you would invest  226,400  in Dan Hotels on September 29, 2024 and sell it today you would earn a total of  2,100  from holding Dan Hotels or generate 0.93% return on investment over 90 days.

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

Dan Hotels  vs.  Israel China Biotechnology

Dan Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dan Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Israel China Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Israel China Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dan Hotels and Israel China

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

The idea behind Dan Hotels and Israel China Biotechnology 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.