Correlation Between Hexa Tradex and Royal Orchid

Can any of the company-specific risk be diversified away by investing in both Hexa Tradex and Royal Orchid 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 Hexa Tradex and Royal Orchid into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Hexa Tradex and Royal Orchid

0.71

Correlation Coefficient

Hexa Tradex  Royal Orchid

Poor diversification

The 3 months correlation between Hexa and Royal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hexa Tradex Limited and Royal Orchid Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Orchid Hotels and Hexa Tradex 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 Hexa Tradex Limited are associated (or correlated) with Royal Orchid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Orchid Hotels has no effect on the direction of Hexa Tradex i.e., Hexa Tradex and Royal Orchid go up and down completely randomly.

Pair Corralation between Hexa Tradex and Royal Orchid

Assuming the 90 days trading horizon Hexa Tradex Limited is expected to under-perform the Royal Orchid. In addition to that, Hexa Tradex is 1.63 times more volatile than Royal Orchid Hotels. It trades about -0.06 of its total potential returns per unit of risk. Royal Orchid Hotels is currently generating about -0.09 per unit of volatility. If you would invest  36,665  in Royal Orchid Hotels on September 2, 2024 and sell it today you would lose (4,405) from holding Royal Orchid Hotels or give up 12.01% of portfolio value over 90 days.

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

Hexa Tradex Limited  vs.  Royal Orchid Hotels

Hexa Tradex Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hexa Tradex 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 fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Royal Orchid Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Orchid Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators 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 Hexa Tradex and Royal Orchid

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

The idea behind Hexa Tradex Limited and Royal Orchid Hotels 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.