Correlation Between Ambassador Hotel and China Times
Can any of the company-specific risk be diversified away by investing in both Ambassador Hotel and China Times 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 China Times into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambassador Hotel and China Times Publishing, you can compare the effects of market volatilities on Ambassador Hotel and China Times 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 China Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambassador Hotel and China Times.
Diversification Opportunities for Ambassador Hotel and China Times
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ambassador and China is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and China Times Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Times Publishing 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 China Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Times Publishing has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and China Times go up and down completely randomly.
Pair Corralation between Ambassador Hotel and China Times
Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 0.56 times more return on investment than China Times. However, Ambassador Hotel is 1.79 times less risky than China Times. It trades about 0.05 of its potential returns per unit of risk. China Times Publishing is currently generating about 0.02 per unit of risk. If you would invest 3,405 in Ambassador Hotel on November 8, 2024 and sell it today you would earn a total of 1,885 from holding Ambassador Hotel or generate 55.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambassador Hotel vs. China Times Publishing
Performance |
| Timeline |
| Ambassador Hotel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China Times Publishing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Ambassador Hotel and China Times Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambassador Hotel and China Times
The main advantage of trading using opposite Ambassador Hotel and China Times positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambassador Hotel position performs unexpectedly, China Times 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 China Times will offset losses from the drop in China Times' long position.The idea behind Ambassador Hotel and China Times Publishing 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.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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