Correlation Between Gamma Communications and Xenia Hotels

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

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

Diversification Opportunities for Gamma Communications and Xenia Hotels

-0.05

Correlation Coefficient

Gamma Communications  Xenia Hotels

Good diversification

The 3 months correlation between Gamma and Xenia is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts and Gamma Communications 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 Gamma Communications plc are associated (or correlated) with Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of Gamma Communications i.e., Gamma Communications and Xenia Hotels go up and down completely randomly.

Pair Corralation between Gamma Communications and Xenia Hotels

Assuming the 90 days horizon Gamma Communications plc is expected to under-perform the Xenia Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications plc is 1.48 times less risky than Xenia Hotels. The stock trades about -0.1 of its potential returns per unit of risk. The Xenia Hotels Resorts is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Xenia Hotels Resorts on October 7, 2024 and sell it today you would earn a total of  62.00  from holding Xenia Hotels Resorts or generate 4.57% return on investment over 90 days.

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

Gamma Communications plc  vs.  Xenia Hotels Resorts

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Xenia Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Gamma Communications and Xenia Hotels

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

The idea behind Gamma Communications plc and Xenia Hotels Resorts 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.