Correlation Between Ambassador Hotel and Farglory Life

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

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

Diversification Opportunities for Ambassador Hotel and Farglory Life

0.11

Correlation Coefficient

Ambassador Hotel  Farglory Life

Average diversification

The 3 months correlation between Ambassador and Farglory is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and Farglory Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Life Insurance 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 Farglory Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Life Insurance has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and Farglory Life go up and down completely randomly.

Pair Corralation between Ambassador Hotel and Farglory Life

Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 1.06 times more return on investment than Farglory Life. However, Ambassador Hotel is 1.06 times more volatile than Farglory Life Insurance. It trades about -0.03 of its potential returns per unit of risk. Farglory Life Insurance is currently generating about -0.15 per unit of risk. If you would invest  5,450  in Ambassador Hotel on October 21, 2024 and sell it today you would lose (60.00) from holding Ambassador Hotel or give up 1.1% of portfolio value over 90 days.

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

Ambassador Hotel  vs.  Farglory Life Insurance

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 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.

Farglory Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambassador Hotel and Farglory Life

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

The idea behind Ambassador Hotel and Farglory Life Insurance 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.