Correlation Between Dan Hotels and Multi Retail

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Can any of the company-specific risk be diversified away by investing in both Dan Hotels and Multi Retail 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 Multi Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dan Hotels and Multi Retail Group, you can compare the effects of market volatilities on Dan Hotels and Multi Retail 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 Multi Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dan Hotels and Multi Retail.

Diversification Opportunities for Dan Hotels and Multi Retail

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Dan and Multi is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dan Hotels and Multi Retail Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Retail Group 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 Multi Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Retail Group has no effect on the direction of Dan Hotels i.e., Dan Hotels and Multi Retail go up and down completely randomly.

Pair Corralation between Dan Hotels and Multi Retail

Assuming the 90 days trading horizon Dan Hotels is expected to generate 0.67 times more return on investment than Multi Retail. However, Dan Hotels is 1.48 times less risky than Multi Retail. It trades about 0.01 of its potential returns per unit of risk. Multi Retail Group is currently generating about 0.0 per unit of risk. If you would invest  227,600  in Dan Hotels on September 20, 2024 and sell it today you would lose (1,400) from holding Dan Hotels or give up 0.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dan Hotels  vs.  Multi Retail Group

 Performance 
       Timeline  
Dan Hotels 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Multi Retail Group 

Risk-Adjusted Performance

25 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Multi Retail Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Multi Retail sustained solid returns over the last few months and may actually be approaching a breakup point.

Dan Hotels and Multi Retail Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dan Hotels and Multi Retail

The main advantage of trading using opposite Dan Hotels and Multi Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dan Hotels position performs unexpectedly, Multi Retail 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 Multi Retail will offset losses from the drop in Multi Retail's long position.
The idea behind Dan Hotels and Multi Retail 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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