Correlation Between AdvisorShares Vice and Defiance Hotel

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

By analyzing existing cross correlation between AdvisorShares Vice ETF and Defiance Hotel Airline, you can compare the effects of market volatilities on AdvisorShares Vice and Defiance 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 AdvisorShares Vice with a short position of Defiance Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares Vice and Defiance Hotel.

Diversification Opportunities for AdvisorShares Vice and Defiance Hotel

0.91

Correlation Coefficient

AdvisorShares Vice  Defiance Hotel

Almost no diversification

The 3 months correlation between AdvisorShares and Defiance is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares Vice ETF and Defiance Hotel Airline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Hotel Airline and AdvisorShares Vice 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 AdvisorShares Vice ETF are associated (or correlated) with Defiance Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Hotel Airline has no effect on the direction of AdvisorShares Vice i.e., AdvisorShares Vice and Defiance Hotel go up and down completely randomly.

Pair Corralation between AdvisorShares Vice and Defiance Hotel

Given the investment horizon of 90 days AdvisorShares Vice is expected to generate 4.41 times less return on investment than Defiance Hotel. But when comparing it to its historical volatility, AdvisorShares Vice ETF is 1.43 times less risky than Defiance Hotel. It trades about 0.09 of its potential returns per unit of risk. Defiance Hotel Airline is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,053  in Defiance Hotel Airline on September 21, 2024 and sell it today you would earn a total of  658.43  from holding Defiance Hotel Airline or generate 32.07% return on investment over 90 days.

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

AdvisorShares Vice ETF  vs.  Defiance Hotel Airline

AdvisorShares Vice ETF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Vice ETF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, AdvisorShares Vice is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Defiance Hotel Airline

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Hotel Airline are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Defiance Hotel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AdvisorShares Vice and Defiance Hotel

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

The idea behind AdvisorShares Vice ETF and Defiance Hotel Airline 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.