Correlation Between Ambassador Hotel and Hotel Royal
Can any of the company-specific risk be diversified away by investing in both Ambassador Hotel and Hotel Royal 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 Hotel Royal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambassador Hotel and Hotel Royal Chihpen, you can compare the effects of market volatilities on Ambassador Hotel and Hotel Royal 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 Hotel Royal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambassador Hotel and Hotel Royal.
Diversification Opportunities for Ambassador Hotel and Hotel Royal
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ambassador and Hotel is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and Hotel Royal Chihpen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Royal Chihpen 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 Hotel Royal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Royal Chihpen has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and Hotel Royal go up and down completely randomly.
Pair Corralation between Ambassador Hotel and Hotel Royal
Assuming the 90 days trading horizon Ambassador Hotel is expected to under-perform the Hotel Royal. But the stock apears to be less risky and, when comparing its historical volatility, Ambassador Hotel is 1.75 times less risky than Hotel Royal. The stock trades about -0.19 of its potential returns per unit of risk. The Hotel Royal Chihpen is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 3,730 in Hotel Royal Chihpen on September 26, 2024 and sell it today you would lose (230.00) from holding Hotel Royal Chihpen or give up 6.17% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Ambassador Hotel vs. Hotel Royal Chihpen
Performance |
Timeline |
Ambassador Hotel |
Hotel Royal Chihpen |
Ambassador Hotel and Hotel Royal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ambassador Hotel and Hotel Royal
The main advantage of trading using opposite Ambassador Hotel and Hotel Royal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambassador Hotel position performs unexpectedly, Hotel Royal 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 Hotel Royal will offset losses from the drop in Hotel Royal's long position.Ambassador Hotel vs. Formosa International Hotels | Ambassador Hotel vs. Far Eastern Department | Ambassador Hotel vs. Leofoo Development Co | Ambassador Hotel vs. U Ming Marine Transport |
Hotel Royal vs. Formosa International Hotels | Hotel Royal vs. Ambassador Hotel | Hotel Royal vs. FDC International Hotels | Hotel Royal vs. First Hotel Co |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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