Correlation Between American Hotel and UPS CDR

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

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

Diversification Opportunities for American Hotel and UPS CDR

0.16

Correlation Coefficient

American Hotel  UPS CDR

Average diversification

The 3 months correlation between American and UPS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Hotel Income and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR and American 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 American Hotel Income are associated (or correlated) with UPS CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPS CDR has no effect on the direction of American Hotel i.e., American Hotel and UPS CDR go up and down completely randomly.

Pair Corralation between American Hotel and UPS CDR

Assuming the 90 days trading horizon American Hotel Income is expected to under-perform the UPS CDR. In addition to that, American Hotel is 2.01 times more volatile than UPS CDR. It trades about -0.08 of its total potential returns per unit of risk. UPS CDR is currently generating about 0.02 per unit of volatility. If you would invest  1,673  in UPS CDR on September 15, 2024 and sell it today you would earn a total of  13.00  from holding UPS CDR or generate 0.78% return on investment over 90 days.

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

American Hotel Income  vs.  UPS CDR

American Hotel Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Hotel Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

UPS CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UPS CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, UPS CDR is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Hotel and UPS CDR

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

The idea behind American Hotel Income and UPS CDR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.