Correlation Between Ambassador Hotel and Formosa International
Can any of the company-specific risk be diversified away by investing in both Ambassador Hotel and Formosa International 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 Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambassador Hotel and Formosa International Hotels, you can compare the effects of market volatilities on Ambassador Hotel and Formosa International 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 Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambassador Hotel and Formosa International.
Diversification Opportunities for Ambassador Hotel and Formosa International
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ambassador and Formosa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International 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 Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and Formosa International go up and down completely randomly.
Pair Corralation between Ambassador Hotel and Formosa International
Assuming the 90 days trading horizon Ambassador Hotel is expected to under-perform the Formosa International. In addition to that, Ambassador Hotel is 1.69 times more volatile than Formosa International Hotels. It trades about -0.07 of its total potential returns per unit of risk. Formosa International Hotels is currently generating about -0.03 per unit of volatility. If you would invest 20,150 in Formosa International Hotels on October 26, 2024 and sell it today you would lose (500.00) from holding Formosa International Hotels or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambassador Hotel vs. Formosa International Hotels
Performance |
| Timeline |
| Ambassador Hotel |
| Formosa International |
Ambassador Hotel and Formosa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambassador Hotel and Formosa International
The main advantage of trading using opposite Ambassador Hotel and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambassador Hotel position performs unexpectedly, Formosa International 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 Formosa International will offset losses from the drop in Formosa International'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 |
| Formosa International vs. Tong Yang Industry | Formosa International vs. Ta Yih Industrial | Formosa International vs. Basso Industry Corp | Formosa International vs. China Motor Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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