Correlation Between Taiwan Weighted and Ambassador Hotel
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted 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 Taiwan Weighted and Ambassador Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Ambassador Hotel, you can compare the effects of market volatilities on Taiwan Weighted 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 Taiwan Weighted with a short position of Ambassador Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Ambassador Hotel.
Diversification Opportunities for Taiwan Weighted and Ambassador Hotel
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Ambassador is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Ambassador Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambassador Hotel and Taiwan Weighted 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 Taiwan Weighted 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 Taiwan Weighted i.e., Taiwan Weighted and Ambassador Hotel go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Ambassador Hotel
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 0.47 times more return on investment than Ambassador Hotel. However, Taiwan Weighted is 2.13 times less risky than Ambassador Hotel. It trades about -0.11 of its potential returns per unit of risk. Ambassador Hotel is currently generating about -0.2 per unit of risk. If you would invest 2,278,008 in Taiwan Weighted on September 2, 2024 and sell it today you would lose (51,758) from holding Taiwan Weighted or give up 2.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Weighted vs. Ambassador Hotel
Performance |
| Timeline |
Taiwan Weighted and Ambassador Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Ambassador Hotel
Pair trading matchups for Ambassador Hotel
Pair Trading with Taiwan Weighted and Ambassador Hotel
The main advantage of trading using opposite Taiwan Weighted and Ambassador Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted 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.| Taiwan Weighted vs. Wei Chuan Foods | Taiwan Weighted vs. Sunny Friend Environmental | Taiwan Weighted vs. Mayer Steel Pipe | Taiwan Weighted vs. Standard Foods Corp |
| Ambassador Hotel vs. Chaintech Technology Corp | Ambassador Hotel vs. Avision | Ambassador Hotel vs. Clevo Co | Ambassador Hotel vs. Elitegroup Computer Systems |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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