Correlation Between Xenia Hotels and HP

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

By analyzing existing cross correlation between Xenia Hotels Resorts and HP Inc, you can compare the effects of market volatilities on Xenia Hotels and HP 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 Xenia Hotels with a short position of HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xenia Hotels and HP.

Diversification Opportunities for Xenia Hotels and HP

-0.08

Correlation Coefficient

Xenia Hotels  HP

Good diversification

The 3 months correlation between Xenia and HP is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and Xenia Hotels 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 Xenia Hotels Resorts are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Xenia Hotels i.e., Xenia Hotels and HP go up and down completely randomly.

Pair Corralation between Xenia Hotels and HP

Assuming the 90 days trading horizon Xenia Hotels Resorts is expected to under-perform the HP. In addition to that, Xenia Hotels is 1.11 times more volatile than HP Inc. It trades about -0.12 of its total potential returns per unit of risk. HP Inc is currently generating about -0.1 per unit of volatility. If you would invest  3,417  in HP Inc on October 11, 2024 and sell it today you would lose (128.00) from holding HP Inc or give up 3.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Xenia Hotels Resorts  vs.  HP Inc

Xenia Hotels Resorts

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xenia Hotels and HP

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

The idea behind Xenia Hotels Resorts and HP Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.