Correlation Between Ambassador Hotel and Hotai
Can any of the company-specific risk be diversified away by investing in both Ambassador Hotel and Hotai 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 Ambassador Hotel and Hotai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambassador Hotel and Hotai Motor Co, you can compare the effects of market volatilities on Ambassador Hotel and Hotai 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 Ambassador Hotel with a short position of Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambassador Hotel and Hotai.
Diversification Opportunities for Ambassador Hotel and Hotai
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ambassador and Hotai is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor and Ambassador Hotel 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 Ambassador Hotel are associated (or correlated) with Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and Hotai go up and down completely randomly.
Pair Corralation between Ambassador Hotel and Hotai
Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 1.73 times more return on investment than Hotai. However, Ambassador Hotel is 1.73 times more volatile than Hotai Motor Co. It trades about -0.03 of its potential returns per unit of risk. Hotai Motor Co is currently generating about -0.13 per unit of risk. If you would invest 5,830 in Ambassador Hotel on August 31, 2024 and sell it today you would lose (120.00) from holding Ambassador Hotel or give up 2.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambassador Hotel vs. Hotai Motor Co
Performance |
| Timeline |
| Ambassador Hotel |
| Hotai Motor |
Ambassador Hotel and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambassador Hotel and Hotai
The main advantage of trading using opposite Ambassador Hotel and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambassador Hotel position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Ambassador Hotel vs. Formosa International Hotels | Ambassador Hotel vs. Far Eastern Department | Ambassador Hotel vs. Leofoo Development Co | Ambassador Hotel vs. U Ming Marine Transport |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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