Correlation Between Farglory Land and Ambassador Hotel

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

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

Diversification Opportunities for Farglory Land and Ambassador Hotel

0.74

Correlation Coefficient

Farglory Land  Ambassador Hotel

Poor diversification

The 3 months correlation between Farglory and Ambassador is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Farglory Land Development and Ambassador Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambassador Hotel and Farglory Land 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 Farglory Land Development are associated (or correlated) with Ambassador Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambassador Hotel has no effect on the direction of Farglory Land i.e., Farglory Land and Ambassador Hotel go up and down completely randomly.

Pair Corralation between Farglory Land and Ambassador Hotel

Assuming the 90 days trading horizon Farglory Land Development is expected to under-perform the Ambassador Hotel. In addition to that, Farglory Land is 1.73 times more volatile than Ambassador Hotel. It trades about -0.21 of its total potential returns per unit of risk. Ambassador Hotel is currently generating about 0.1 per unit of volatility. If you would invest  6,070  in Ambassador Hotel on July 2, 2024 and sell it today you would earn a total of  200.00  from holding Ambassador Hotel or generate 3.29% return on investment over 90 days.

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

Farglory Land Development  vs.  Ambassador Hotel

Farglory Land Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farglory Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ambassador Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambassador Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Farglory Land and Ambassador Hotel

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

The idea behind Farglory Land Development and Ambassador Hotel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.