Correlation Between U Ming and Ambassador Hotel

Can any of the company-specific risk be diversified away by investing in both U Ming 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 U Ming and Ambassador Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Ming Marine Transport and Ambassador Hotel, you can compare the effects of market volatilities on U Ming 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 U Ming with a short position of Ambassador Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Ambassador Hotel.

Diversification Opportunities for U Ming and Ambassador Hotel

0.14

Correlation Coefficient

U Ming  Ambassador Hotel

Average diversification

The 3 months correlation between 2606 and Ambassador is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Ambassador Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambassador Hotel and U Ming 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 U Ming Marine Transport 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 U Ming i.e., U Ming and Ambassador Hotel go up and down completely randomly.

Pair Corralation between U Ming and Ambassador Hotel

Assuming the 90 days trading horizon U Ming is expected to generate 1.46 times less return on investment than Ambassador Hotel. In addition to that, U Ming is 1.15 times more volatile than Ambassador Hotel. It trades about 0.04 of its total potential returns per unit of risk. Ambassador Hotel is currently generating about 0.06 per unit of volatility. If you would invest  3,430  in Ambassador Hotel on December 5, 2024 and sell it today you would earn a total of  2,170  from holding Ambassador Hotel or generate 63.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

U Ming Marine Transport  vs.  Ambassador Hotel

U Ming Marine

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Ambassador Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ambassador Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ambassador Hotel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with U Ming and Ambassador Hotel

The main advantage of trading using opposite U Ming and Ambassador Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Ming 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.

The idea behind U Ming Marine Transport and Ambassador Hotel 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.