Correlation Between Ambassador Hotel and WiseChip Semiconductor

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

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

Diversification Opportunities for Ambassador Hotel and WiseChip Semiconductor

0.78

Correlation Coefficient

Ambassador Hotel  WiseChip Semiconductor

Poor diversification

The 3 months correlation between Ambassador and WiseChip is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and WiseChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WiseChip Semiconductor 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 WiseChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WiseChip Semiconductor has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and WiseChip Semiconductor go up and down completely randomly.

Pair Corralation between Ambassador Hotel and WiseChip Semiconductor

Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 0.68 times more return on investment than WiseChip Semiconductor. However, Ambassador Hotel is 1.47 times less risky than WiseChip Semiconductor. It trades about -0.01 of its potential returns per unit of risk. WiseChip Semiconductor is currently generating about -0.03 per unit of risk. If you would invest  5,800  in Ambassador Hotel on September 13, 2024 and sell it today you would lose (90.00) from holding Ambassador Hotel or give up 1.55% of portfolio value over 90 days.

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

Ambassador Hotel  vs.  WiseChip Semiconductor

Ambassador Hotel

Risk-Adjusted Performance

0 of 100

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.

WiseChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WiseChip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WiseChip Semiconductor 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 Ambassador Hotel and WiseChip Semiconductor

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

The idea behind Ambassador Hotel and WiseChip Semiconductor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.