Correlation Between Leons Furniture and American Hotel
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and American 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 Leons Furniture and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and American Hotel Income, you can compare the effects of market volatilities on Leons Furniture and American 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 Leons Furniture with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and American Hotel.
Diversification Opportunities for Leons Furniture and American Hotel
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leons and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Leons Furniture i.e., Leons Furniture and American Hotel go up and down completely randomly.
Pair Corralation between Leons Furniture and American Hotel
Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the American Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 2.92 times less risky than American Hotel. The stock trades about -0.1 of its potential returns per unit of risk. The American Hotel Income is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 34.00 in American Hotel Income on September 12, 2024 and sell it today you would earn a total of 0.00 from holding American Hotel Income or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Leons Furniture Limited vs. American Hotel Income
Performance |
Timeline |
Leons Furniture |
American Hotel Income |
Leons Furniture and American Hotel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Leons Furniture and American Hotel
The main advantage of trading using opposite Leons Furniture and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, American 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 American Hotel will offset losses from the drop in American Hotel's long position.Leons Furniture vs. Apple Inc CDR | Leons Furniture vs. NVIDIA CDR | Leons Furniture vs. Microsoft Corp CDR | Leons Furniture vs. Amazon CDR |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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