Correlation Between Steamships Trading and Hotel Property

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

By analyzing existing cross correlation between Steamships Trading and Hotel Property Investments, you can compare the effects of market volatilities on Steamships Trading and Hotel Property 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 Steamships Trading with a short position of Hotel Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steamships Trading and Hotel Property.

Diversification Opportunities for Steamships Trading and Hotel Property

-0.59

Correlation Coefficient

Steamships Trading  Hotel Property

Excellent diversification

The 3 months correlation between Steamships and Hotel is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Steamships Trading and Hotel Property Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Property Inves and Steamships Trading 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 Steamships Trading are associated (or correlated) with Hotel Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Property Inves has no effect on the direction of Steamships Trading i.e., Steamships Trading and Hotel Property go up and down completely randomly.

Pair Corralation between Steamships Trading and Hotel Property

Assuming the 90 days trading horizon Steamships Trading is expected to under-perform the Hotel Property. But the stock apears to be less risky and, when comparing its historical volatility, Steamships Trading is 4.7 times less risky than Hotel Property. The stock trades about -0.02 of its potential returns per unit of risk. The Hotel Property Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  364.00  in Hotel Property Investments on September 29, 2024 and sell it today you would earn a total of  14.00  from holding Hotel Property Investments or generate 3.85% return on investment over 90 days.

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

Steamships Trading  vs.  Hotel Property Investments

Steamships Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steamships Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Steamships Trading is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hotel Property Inves

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Property Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Hotel Property is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Steamships Trading and Hotel Property

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

The idea behind Steamships Trading and Hotel Property Investments 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.