Correlation Between American Hotel and Pacific West
Can any of the company-specific risk be diversified away by investing in both American Hotel and Pacific West 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 American Hotel and Pacific West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Hotel Income and Pacific West Bancorp, you can compare the effects of market volatilities on American Hotel and Pacific West 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 American Hotel with a short position of Pacific West. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Hotel and Pacific West.
Diversification Opportunities for American Hotel and Pacific West
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Pacific is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding American Hotel Income and Pacific West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific West Bancorp and American 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 American Hotel Income are associated (or correlated) with Pacific West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific West Bancorp has no effect on the direction of American Hotel i.e., American Hotel and Pacific West go up and down completely randomly.
Pair Corralation between American Hotel and Pacific West
Assuming the 90 days horizon American Hotel Income is expected to generate 2.01 times more return on investment than Pacific West. However, American Hotel is 2.01 times more volatile than Pacific West Bancorp. It trades about 0.07 of its potential returns per unit of risk. Pacific West Bancorp is currently generating about -0.01 per unit of risk. If you would invest 44.00 in American Hotel Income on November 6, 2024 and sell it today you would earn a total of 7.00 from holding American Hotel Income or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Hotel Income vs. Pacific West Bancorp
Performance |
| Timeline |
| American Hotel Income |
| Pacific West Bancorp |
American Hotel and Pacific West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Hotel and Pacific West
The main advantage of trading using opposite American Hotel and Pacific West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Hotel position performs unexpectedly, Pacific West 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 Pacific West will offset losses from the drop in Pacific West's long position.| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
| Pacific West vs. Sphere Entertainment Co | Pacific West vs. Ballys Corp | Pacific West vs. Dine Brands Global | Pacific West vs. National CineMedia |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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