Correlation Between Xenia Hotels and Insteel Industries

Can any of the company-specific risk be diversified away by investing in both Xenia Hotels and Insteel Industries 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 Insteel Industries 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 Insteel Industries, you can compare the effects of market volatilities on Xenia Hotels and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xenia Hotels and Insteel Industries.

Diversification Opportunities for Xenia Hotels and Insteel Industries

0.28

Correlation Coefficient

Xenia Hotels  Insteel Industries

Modest diversification

The 3 months correlation between Xenia and Insteel is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Xenia Hotels i.e., Xenia Hotels and Insteel Industries go up and down completely randomly.

Pair Corralation between Xenia Hotels and Insteel Industries

Assuming the 90 days trading horizon Xenia Hotels Resorts is expected to generate 1.27 times more return on investment than Insteel Industries. However, Xenia Hotels is 1.27 times more volatile than Insteel Industries. It trades about 0.18 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.11 per unit of risk. If you would invest  1,390  in Xenia Hotels Resorts on September 12, 2024 and sell it today you would earn a total of  120.00  from holding Xenia Hotels Resorts or generate 8.63% return on investment over 90 days.

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

Xenia Hotels Resorts  vs.  Insteel Industries

Xenia Hotels Resorts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Xenia Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Insteel Industries

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Insteel Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xenia Hotels and Insteel Industries

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

The idea behind Xenia Hotels Resorts and Insteel Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.