Correlation Between Ambassador Hotel and MetaTech

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

By analyzing existing cross correlation between Ambassador Hotel and MetaTech AP, you can compare the effects of market volatilities on Ambassador Hotel and MetaTech 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 MetaTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambassador Hotel and MetaTech.

Diversification Opportunities for Ambassador Hotel and MetaTech

-0.45

Correlation Coefficient

Ambassador Hotel  MetaTech

Very good diversification

The 3 months correlation between Ambassador and MetaTech is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and MetaTech AP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetaTech AP 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 MetaTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetaTech AP has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and MetaTech go up and down completely randomly.

Pair Corralation between Ambassador Hotel and MetaTech

Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 1.29 times more return on investment than MetaTech. However, Ambassador Hotel is 1.29 times more volatile than MetaTech AP. It trades about -0.03 of its potential returns per unit of risk. MetaTech AP is currently generating about -0.13 per unit of risk. If you would invest  5,760  in Ambassador Hotel on December 5, 2024 and sell it today you would lose (160.00) from holding Ambassador Hotel or give up 2.78% of portfolio value over 90 days.

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

Ambassador Hotel  vs.  MetaTech AP

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.

MetaTech AP

Risk-Adjusted Performance

Very Weak

Over the last 90 days MetaTech AP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ambassador Hotel and MetaTech

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

The idea behind Ambassador Hotel and MetaTech AP 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.

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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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.