Correlation Between ABC Taiwan and Ambassador Hotel
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and Ambassador 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 ABC Taiwan and Ambassador Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABC Taiwan Electronics and Ambassador Hotel, you can compare the effects of market volatilities on ABC Taiwan and Ambassador 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 ABC Taiwan with a short position of Ambassador Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and Ambassador Hotel.
Diversification Opportunities for ABC Taiwan and Ambassador Hotel
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ABC and Ambassador is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and Ambassador Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambassador Hotel and ABC Taiwan 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 ABC Taiwan Electronics are associated (or correlated) with Ambassador Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambassador Hotel has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and Ambassador Hotel go up and down completely randomly.
Pair Corralation between ABC Taiwan and Ambassador Hotel
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to generate 0.61 times more return on investment than Ambassador Hotel. However, ABC Taiwan Electronics is 1.64 times less risky than Ambassador Hotel. It trades about 0.05 of its potential returns per unit of risk. Ambassador Hotel is currently generating about 0.01 per unit of risk. If you would invest 2,275 in ABC Taiwan Electronics on August 29, 2024 and sell it today you would earn a total of 30.00 from holding ABC Taiwan Electronics or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. Ambassador Hotel
Performance |
| Timeline |
| ABC Taiwan Electronics |
| Ambassador Hotel |
ABC Taiwan and Ambassador Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and Ambassador Hotel
The main advantage of trading using opposite ABC Taiwan and Ambassador Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, Ambassador 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 Ambassador Hotel will offset losses from the drop in Ambassador Hotel's long position.| ABC Taiwan vs. Hon Hai Precision | ABC Taiwan vs. Delta Electronics | ABC Taiwan vs. LARGAN Precision Co | ABC Taiwan vs. E Ink Holdings |
| Ambassador Hotel vs. Yulon Finance Corp | Ambassador Hotel vs. Taiwan Secom Co | Ambassador Hotel vs. Pou Chen Corp | Ambassador Hotel vs. Great Wall Enterprise |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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