Correlation Between American Hotel and PJX Resources
Can any of the company-specific risk be diversified away by investing in both American Hotel and PJX Resources 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 American Hotel and PJX Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Hotel Income and PJX Resources, you can compare the effects of market volatilities on American Hotel and PJX Resources 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 American Hotel with a short position of PJX Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Hotel and PJX Resources.
Diversification Opportunities for American Hotel and PJX Resources
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and PJX is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Hotel Income and PJX Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJX Resources and American 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 American Hotel Income are associated (or correlated) with PJX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJX Resources has no effect on the direction of American Hotel i.e., American Hotel and PJX Resources go up and down completely randomly.
Pair Corralation between American Hotel and PJX Resources
Assuming the 90 days trading horizon American Hotel Income is expected to generate 0.54 times more return on investment than PJX Resources. However, American Hotel Income is 1.84 times less risky than PJX Resources. It trades about 0.03 of its potential returns per unit of risk. PJX Resources is currently generating about -0.06 per unit of risk. If you would invest 34.00 in American Hotel Income on September 7, 2024 and sell it today you would earn a total of 1.00 from holding American Hotel Income or generate 2.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
American Hotel Income vs. PJX Resources
Performance |
Timeline |
American Hotel Income |
PJX Resources |
American Hotel and PJX Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Hotel and PJX Resources
The main advantage of trading using opposite American Hotel and PJX Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Hotel position performs unexpectedly, PJX Resources 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 PJX Resources will offset losses from the drop in PJX Resources' long position.American Hotel vs. Stampede Drilling | American Hotel vs. Guru Organic Energy | American Hotel vs. Canso Select Opportunities | American Hotel vs. Rogers Communications |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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