Correlation Between Ally Leasehold and LH Hotel

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

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

Diversification Opportunities for Ally Leasehold and LH Hotel

0.48

Correlation Coefficient

Ally Leasehold  LH Hotel

Very weak diversification

The 3 months correlation between Ally and LHHOTEL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ally Leasehold Real and LH Hotel Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Hotel Leasehold and Ally Leasehold 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 Ally Leasehold Real are associated (or correlated) with LH Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Hotel Leasehold has no effect on the direction of Ally Leasehold i.e., Ally Leasehold and LH Hotel go up and down completely randomly.

Pair Corralation between Ally Leasehold and LH Hotel

Assuming the 90 days trading horizon Ally Leasehold Real is expected to generate 1.31 times more return on investment than LH Hotel. However, Ally Leasehold is 1.31 times more volatile than LH Hotel Leasehold. It trades about 0.2 of its potential returns per unit of risk. LH Hotel Leasehold is currently generating about 0.09 per unit of risk. If you would invest  454.00  in Ally Leasehold Real on September 15, 2024 and sell it today you would earn a total of  91.00  from holding Ally Leasehold Real or generate 20.04% return on investment over 90 days.

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

Ally Leasehold Real  vs.  LH Hotel Leasehold

Ally Leasehold Real

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Leasehold Real are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Ally Leasehold disclosed solid returns over the last few months and may actually be approaching a breakup point.

LH Hotel Leasehold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LH Hotel Leasehold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, LH Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ally Leasehold and LH Hotel

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

The idea behind Ally Leasehold Real and LH Hotel Leasehold 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.