Correlation Between North American and American Hotel
Can any of the company-specific risk be diversified away by investing in both North American and American 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 North American and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and American Hotel Income, you can compare the effects of market volatilities on North American and American 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 North American with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and American Hotel.
Diversification Opportunities for North American and American Hotel
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and American is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and North American 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 North American Construction are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of North American i.e., North American and American Hotel go up and down completely randomly.
Pair Corralation between North American and American Hotel
Assuming the 90 days trading horizon North American Construction is expected to generate 0.12 times more return on investment than American Hotel. However, North American Construction is 8.1 times less risky than American Hotel. It trades about 0.27 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.03 per unit of risk. If you would invest 2,741 in North American Construction on September 19, 2024 and sell it today you would earn a total of 249.00 from holding North American Construction or generate 9.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. American Hotel Income
Performance |
| Timeline |
| North American Const |
| American Hotel Income |
North American and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and American Hotel
The main advantage of trading using opposite North American and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, American 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 American Hotel will offset losses from the drop in American Hotel's long position.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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