Correlation Between Quality Houses and LH Hotel

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

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

Diversification Opportunities for Quality Houses and LH Hotel

0.42

Correlation Coefficient

Quality Houses  LH Hotel

Very weak diversification

The 3 months correlation between Quality and LHHOTEL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Quality Houses Hotel 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 Quality Houses 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 Quality Houses Hotel 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 Quality Houses i.e., Quality Houses and LH Hotel go up and down completely randomly.

Pair Corralation between Quality Houses and LH Hotel

Assuming the 90 days trading horizon Quality Houses Hotel is expected to generate 36.47 times more return on investment than LH Hotel. However, Quality Houses is 36.47 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 0.05 per unit of risk. If you would invest  590.00  in Quality Houses Hotel on September 18, 2024 and sell it today you would lose (590.00) from holding Quality Houses Hotel or give up 100.0% of portfolio value over 90 days.

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

Quality Houses Hotel  vs.  LH Hotel Leasehold

Quality Houses Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quality Houses Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

LH Hotel Leasehold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Quality Houses and LH Hotel

The main advantage of trading using opposite Quality Houses and LH Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quality Houses 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 Quality Houses Hotel 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.