Correlation Between Ambassador Hotel and Landis Taipei

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

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

Diversification Opportunities for Ambassador Hotel and Landis Taipei

0.76

Correlation Coefficient

Ambassador Hotel  Landis Taipei

Poor diversification

The 3 months correlation between Ambassador and Landis is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ambassador Hotel and Landis Taipei Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landis Taipei Hotel 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 Landis Taipei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landis Taipei Hotel has no effect on the direction of Ambassador Hotel i.e., Ambassador Hotel and Landis Taipei go up and down completely randomly.

Pair Corralation between Ambassador Hotel and Landis Taipei

Assuming the 90 days trading horizon Ambassador Hotel is expected to generate 0.69 times more return on investment than Landis Taipei. However, Ambassador Hotel is 1.45 times less risky than Landis Taipei. It trades about 0.06 of its potential returns per unit of risk. Landis Taipei Hotel is currently generating about 0.01 per unit of risk. If you would invest  3,185  in Ambassador Hotel on September 24, 2024 and sell it today you would earn a total of  2,265  from holding Ambassador Hotel or generate 71.11% return on investment over 90 days.

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

Ambassador Hotel  vs.  Landis Taipei Hotel

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.

Landis Taipei Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ambassador Hotel and Landis Taipei

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

The idea behind Ambassador Hotel and Landis Taipei Hotel 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.