Correlation Between MPH Health and Xenia Hotels

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

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

Diversification Opportunities for MPH Health and Xenia Hotels

-0.2

Correlation Coefficient

MPH Health  Xenia Hotels

Good diversification

The 3 months correlation between MPH and Xenia is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care 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 MPH Health 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 MPH Health Care 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 MPH Health i.e., MPH Health and Xenia Hotels go up and down completely randomly.

Pair Corralation between MPH Health and Xenia Hotels

Assuming the 90 days trading horizon MPH Health Care is expected to generate 1.37 times more return on investment than Xenia Hotels. However, MPH Health is 1.37 times more volatile than Xenia Hotels Resorts. It trades about 0.05 of its potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.03 per unit of risk. If you would invest  1,429  in MPH Health Care on October 4, 2024 and sell it today you would earn a total of  831.00  from holding MPH Health Care or generate 58.15% return on investment over 90 days.

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

MPH Health Care  vs.  Xenia Hotels Resorts

MPH Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPH Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 uncertain technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MPH Health and Xenia Hotels

The main advantage of trading using opposite MPH Health and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPH Health 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 MPH Health Care 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.