Correlation Between Ambassador Hotel and Louisa Professional

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

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

Diversification Opportunities for Ambassador Hotel and Louisa Professional

0.26

Correlation Coefficient

Ambassador Hotel  Louisa Professional

Modest diversification

The 3 months correlation between Ambassador and Louisa is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and Louisa Professional Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Louisa Professional and Ambassador 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 Ambassador Hotel are associated (or correlated) with Louisa Professional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Louisa Professional has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and Louisa Professional go up and down completely randomly.

Pair Corralation between Ambassador Hotel and Louisa Professional

Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 1.46 times less return on investment than Louisa Professional. But when comparing it to its historical volatility, Ambassador Hotel is 1.32 times less risky than Louisa Professional. It trades about 0.29 of its potential returns per unit of risk. Louisa Professional Coffee is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  9,150  in Louisa Professional Coffee on December 5, 2024 and sell it today you would earn a total of  900.00  from holding Louisa Professional Coffee or generate 9.84% return on investment over 90 days.

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

Ambassador Hotel  vs.  Louisa Professional Coffee

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.

Louisa Professional

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Louisa Professional Coffee are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Louisa Professional may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ambassador Hotel and Louisa Professional

The main advantage of trading using opposite Ambassador Hotel and Louisa Professional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambassador Hotel position performs unexpectedly, Louisa Professional 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 Louisa Professional will offset losses from the drop in Louisa Professional's long position.

The idea behind Ambassador Hotel and Louisa Professional Coffee 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.