Correlation Between Advanced Info and S Hotels

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

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

Diversification Opportunities for Advanced Info and S Hotels

0.01

Correlation Coefficient

Advanced Info  S Hotels

Significant diversification

The 3 months correlation between Advanced and SHR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service and S Hotels and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S Hotels and Advanced Info 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 Advanced Info Service are associated (or correlated) with S Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S Hotels has no effect on the direction of Advanced Info i.e., Advanced Info and S Hotels go up and down completely randomly.

Pair Corralation between Advanced Info and S Hotels

Assuming the 90 days trading horizon Advanced Info Service is expected to generate 0.72 times more return on investment than S Hotels. However, Advanced Info Service is 1.39 times less risky than S Hotels. It trades about 0.12 of its potential returns per unit of risk. S Hotels and is currently generating about 0.05 per unit of risk. If you would invest  25,600  in Advanced Info Service on September 14, 2024 and sell it today you would earn a total of  3,100  from holding Advanced Info Service or generate 12.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Advanced Info Service  vs.  S Hotels and

Advanced Info Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Advanced Info sustained solid returns over the last few months and may actually be approaching a breakup point.

S Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S Hotels and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, S Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Advanced Info and S Hotels

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

The idea behind Advanced Info Service and S Hotels and 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..