Correlation Between Laguna Resorts and Advanced Information

Can any of the company-specific risk be diversified away by investing in both Laguna Resorts and Advanced Information 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 Laguna Resorts and Advanced Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Laguna Resorts Hotels and Advanced Information Technology, you can compare the effects of market volatilities on Laguna Resorts and Advanced Information 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 Laguna Resorts with a short position of Advanced Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laguna Resorts and Advanced Information.

Diversification Opportunities for Laguna Resorts and Advanced Information

0.97

Correlation Coefficient

Laguna Resorts  Advanced Information

Almost no diversification

The 3 months correlation between Laguna and Advanced is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Laguna Resorts Hotels and Advanced Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Information and Laguna Resorts 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 Laguna Resorts Hotels are associated (or correlated) with Advanced Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Information has no effect on the direction of Laguna Resorts i.e., Laguna Resorts and Advanced Information go up and down completely randomly.

Pair Corralation between Laguna Resorts and Advanced Information

Assuming the 90 days trading horizon Laguna Resorts is expected to generate 1.01 times less return on investment than Advanced Information. In addition to that, Laguna Resorts is 1.0 times more volatile than Advanced Information Technology. It trades about 0.13 of its total potential returns per unit of risk. Advanced Information Technology is currently generating about 0.13 per unit of volatility. If you would invest  0.00  in Advanced Information Technology on September 3, 2024 and sell it today you would earn a total of  432.00  from holding Advanced Information Technology or generate 9.223372036854776E16% return on investment over 90 days.

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

Laguna Resorts Hotels  vs.  Advanced Information Technolog

Laguna Resorts Hotels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laguna Resorts Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical indicators, Laguna Resorts disclosed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Information

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Information Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Advanced Information disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laguna Resorts and Advanced Information

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

The idea behind Laguna Resorts Hotels and Advanced Information Technology 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.