Correlation Between LH Hotel and Major Cineplex

Can any of the company-specific risk be diversified away by investing in both LH Hotel and Major Cineplex 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 Major Cineplex 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 Major Cineplex Lifestyle, you can compare the effects of market volatilities on LH Hotel and Major Cineplex 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 Major Cineplex. Check out your portfolio center. Please also check ongoing floating volatility patterns of LH Hotel and Major Cineplex.

Diversification Opportunities for LH Hotel and Major Cineplex

0.3

Correlation Coefficient

LH Hotel  Major Cineplex

Weak diversification

The 3 months correlation between LHHOTEL and Major is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding LH Hotel Leasehold and Major Cineplex Lifestyle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Cineplex Lifestyle 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 Major Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Cineplex Lifestyle has no effect on the direction of LH Hotel i.e., LH Hotel and Major Cineplex go up and down completely randomly.

Pair Corralation between LH Hotel and Major Cineplex

Assuming the 90 days trading horizon LH Hotel Leasehold is expected to under-perform the Major Cineplex. But the stock apears to be less risky and, when comparing its historical volatility, LH Hotel Leasehold is 52.46 times less risky than Major Cineplex. The stock trades about -0.03 of its potential returns per unit of risk. The Major Cineplex Lifestyle is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Major Cineplex Lifestyle on September 3, 2024 and sell it today you would earn a total of  426.00  from holding Major Cineplex Lifestyle or generate 9.223372036854776E16% return on investment over 90 days.

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

LH Hotel Leasehold  vs.  Major Cineplex Lifestyle

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.

Major Cineplex Lifestyle

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Major Cineplex Lifestyle are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Major Cineplex disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LH Hotel and Major Cineplex

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

The idea behind LH Hotel Leasehold and Major Cineplex Lifestyle 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.