Correlation Between Xenia Hotels and SAP SE

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

Diversification Opportunities for Xenia Hotels and SAP SE

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Xenia and SAP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Xenia Hotels i.e., Xenia Hotels and SAP SE go up and down completely randomly.

Pair Corralation between Xenia Hotels and SAP SE

Assuming the 90 days trading horizon Xenia Hotels is expected to generate 1.4 times less return on investment than SAP SE. In addition to that, Xenia Hotels is 1.34 times more volatile than SAP SE. It trades about 0.09 of its total potential returns per unit of risk. SAP SE is currently generating about 0.17 per unit of volatility. If you would invest  21,800  in SAP SE on October 22, 2024 and sell it today you would earn a total of  3,600  from holding SAP SE or generate 16.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Xenia Hotels Resorts  vs.  SAP SE

 Performance 
       Timeline  
Xenia Hotels Resorts 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.
SAP SE 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SAP SE reported solid returns over the last few months and may actually be approaching a breakup point.

Xenia Hotels and SAP SE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xenia Hotels and SAP SE

The main advantage of trading using opposite Xenia Hotels and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xenia Hotels position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.
The idea behind Xenia Hotels Resorts and SAP SE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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