Correlation Between Ziff Davis and American Hotel

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

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

Diversification Opportunities for Ziff Davis and American Hotel

-0.7

Correlation Coefficient

Ziff Davis  American Hotel

Excellent diversification

The 3 months correlation between Ziff and American is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ziff Davis 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 Ziff Davis 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 Ziff Davis 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 Ziff Davis i.e., Ziff Davis and American Hotel go up and down completely randomly.

Pair Corralation between Ziff Davis and American Hotel

Allowing for the 90-day total investment horizon Ziff Davis is expected to generate 0.77 times more return on investment than American Hotel. However, Ziff Davis is 1.3 times less risky than American Hotel. It trades about 0.11 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.05 per unit of risk. If you would invest  4,923  in Ziff Davis on September 13, 2024 and sell it today you would earn a total of  972.00  from holding Ziff Davis or generate 19.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ziff Davis  vs.  American Hotel Income

Ziff Davis

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ziff Davis are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ziff Davis exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Hotel Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Hotel Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ziff Davis and American Hotel

The main advantage of trading using opposite Ziff Davis and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ziff Davis 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.

The idea behind Ziff Davis and American Hotel Income 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.