Correlation Between WHA Premium and Quality Houses

Can any of the company-specific risk be diversified away by investing in both WHA Premium and Quality Houses 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 WHA Premium and Quality Houses into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for WHA Premium and Quality Houses

-0.09

Correlation Coefficient

WHA Premium  Quality Houses

Good diversification

The 3 months correlation between WHA and Quality is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding WHA Premium Growth and Quality Houses Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses Hotel and WHA Premium 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 WHA Premium Growth are associated (or correlated) with Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Hotel has no effect on the direction of WHA Premium i.e., WHA Premium and Quality Houses go up and down completely randomly.

Pair Corralation between WHA Premium and Quality Houses

Assuming the 90 days trading horizon WHA Premium Growth is expected to under-perform the Quality Houses. But the stock apears to be less risky and, when comparing its historical volatility, WHA Premium Growth is 1.02 times less risky than Quality Houses. The stock trades about -0.04 of its potential returns per unit of risk. The Quality Houses Hotel is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  655.00  in Quality Houses Hotel on September 5, 2024 and sell it today you would earn a total of  25.00  from holding Quality Houses Hotel or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

WHA Premium Growth  vs.  Quality Houses Hotel

WHA Premium Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Quality Houses Hotel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Houses Hotel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Quality Houses is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WHA Premium and Quality Houses

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

The idea behind WHA Premium Growth and Quality Houses Hotel 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.