Correlation Between Alaska Energy and American Hotel

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

By analyzing existing cross correlation between Alaska Energy Metals and American Hotel Income, you can compare the effects of market volatilities on Alaska Energy and American Hotel 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 Alaska Energy with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Energy and American Hotel.

Diversification Opportunities for Alaska Energy and American Hotel

0.22

Correlation Coefficient

Alaska Energy  American Hotel

Modest diversification

The 3 months correlation between Alaska and American is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Energy Metals and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and Alaska Energy 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 Alaska Energy Metals are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Alaska Energy i.e., Alaska Energy and American Hotel go up and down completely randomly.

Pair Corralation between Alaska Energy and American Hotel

Assuming the 90 days trading horizon Alaska Energy Metals is expected to under-perform the American Hotel. In addition to that, Alaska Energy is 1.09 times more volatile than American Hotel Income. It trades about 0.0 of its total potential returns per unit of risk. American Hotel Income is currently generating about 0.13 per unit of volatility. If you would invest  43.00  in American Hotel Income on November 20, 2024 and sell it today you would earn a total of  23.00  from holding American Hotel Income or generate 53.49% return on investment over 90 days.

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

Alaska Energy Metals  vs.  American Hotel Income

Alaska Energy Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alaska Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Alaska Energy is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

American Hotel Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Hotel Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, American Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alaska Energy and American Hotel

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

The idea behind Alaska Energy Metals and American Hotel Income 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.