Correlation Between LH Hotel and Impact Growth

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

By analyzing existing cross correlation between LH Hotel Leasehold and Impact Growth REIT, you can compare the effects of market volatilities on LH Hotel and Impact Growth 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 LH Hotel with a short position of Impact Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of LH Hotel and Impact Growth.

Diversification Opportunities for LH Hotel and Impact Growth

0.29

Correlation Coefficient

LH Hotel  Impact Growth

Modest diversification

The 3 months correlation between LHHOTEL and Impact is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding LH Hotel Leasehold and Impact Growth REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impact Growth REIT and LH Hotel 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 LH Hotel Leasehold are associated (or correlated) with Impact Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impact Growth REIT has no effect on the direction of LH Hotel i.e., LH Hotel and Impact Growth go up and down completely randomly.

Pair Corralation between LH Hotel and Impact Growth

Assuming the 90 days trading horizon LH Hotel Leasehold is expected to generate 1.87 times more return on investment than Impact Growth. However, LH Hotel is 1.87 times more volatile than Impact Growth REIT. It trades about -0.03 of its potential returns per unit of risk. Impact Growth REIT is currently generating about -0.08 per unit of risk. If you would invest  1,190  in LH Hotel Leasehold on September 3, 2024 and sell it today you would lose (79.00) from holding LH Hotel Leasehold or give up 6.64% of portfolio value over 90 days.

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

LH Hotel Leasehold  vs.  Impact Growth REIT

LH Hotel Leasehold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LH Hotel Leasehold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, LH Hotel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Impact Growth REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impact Growth REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Impact Growth is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LH Hotel and Impact Growth

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

The idea behind LH Hotel Leasehold and Impact Growth REIT 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.