Correlation Between Muangthai Capital and LH Hotel

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

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

Diversification Opportunities for Muangthai Capital and LH Hotel

0.23

Correlation Coefficient

Muangthai Capital  LH Hotel

Modest diversification

The 3 months correlation between Muangthai and LHHOTEL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Muangthai Capital Public and LH Hotel Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Hotel Leasehold and Muangthai Capital 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 Muangthai Capital Public are associated (or correlated) with LH Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Hotel Leasehold has no effect on the direction of Muangthai Capital i.e., Muangthai Capital and LH Hotel go up and down completely randomly.

Pair Corralation between Muangthai Capital and LH Hotel

Assuming the 90 days trading horizon Muangthai Capital Public is expected to generate 34.95 times more return on investment than LH Hotel. However, Muangthai Capital is 34.95 times more volatile than LH Hotel Leasehold. It trades about 0.04 of its potential returns per unit of risk. LH Hotel Leasehold is currently generating about 0.06 per unit of risk. If you would invest  3,631  in Muangthai Capital Public on September 16, 2024 and sell it today you would earn a total of  1,369  from holding Muangthai Capital Public or generate 37.7% return on investment over 90 days.

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

Muangthai Capital Public  vs.  LH Hotel Leasehold

Muangthai Capital Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

LH Hotel Leasehold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, LH Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Muangthai Capital and LH Hotel

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

The idea behind Muangthai Capital Public and LH Hotel Leasehold 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.