Correlation Between Target and Huazhu
Can any of the company-specific risk be diversified away by investing in both Target and Huazhu 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 Target and Huazhu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Huazhu Group, you can compare the effects of market volatilities on Target and Huazhu 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 Target with a short position of Huazhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Huazhu.
Diversification Opportunities for Target and Huazhu
Very poor diversification
The 3 months correlation between Target and Huazhu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Target and Huazhu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huazhu Group and Target 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 Target are associated (or correlated) with Huazhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huazhu Group has no effect on the direction of Target i.e., Target and Huazhu go up and down completely randomly.
Pair Corralation between Target and Huazhu
Considering the 90-day investment horizon Target is expected to generate 0.59 times more return on investment than Huazhu. However, Target is 1.69 times less risky than Huazhu. It trades about -0.02 of its potential returns per unit of risk. Huazhu Group is currently generating about -0.12 per unit of risk. If you would invest 16,821 in Target on January 19, 2024 and sell it today you would lose (108.00) from holding Target or give up 0.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target vs. Huazhu Group
Performance |
| Timeline |
| Target |
| Huazhu Group |
Target and Huazhu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target and Huazhu
The main advantage of trading using opposite Target and Huazhu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Huazhu 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 Huazhu will offset losses from the drop in Huazhu's long position.| Target vs. Betterware De Mexico | Target vs. Amexdrug | Target vs. Provident Bancorp | Target vs. Mersana Therapeutics |
Check out your portfolio center.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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