Correlation Between Consolidated Communications and Xenia Hotels

Can any of the company-specific risk be diversified away by investing in both Consolidated 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 Consolidated 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 Consolidated Communications Holdings and Xenia Hotels Resorts, you can compare the effects of market volatilities on Consolidated 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 Consolidated Communications with a short position of Xenia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and Xenia Hotels.

Diversification Opportunities for Consolidated Communications and Xenia Hotels

0.7

Correlation Coefficient

Consolidated Communications  Xenia Hotels

Poor diversification

The 3 months correlation between Consolidated and Xenia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho 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 Consolidated 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and Xenia Hotels go up and down completely randomly.

Pair Corralation between Consolidated Communications and Xenia Hotels

Assuming the 90 days horizon Consolidated Communications is expected to generate 1.5 times less return on investment than Xenia Hotels. But when comparing it to its historical volatility, Consolidated Communications Holdings is 2.71 times less risky than Xenia Hotels. It trades about 0.16 of its potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,319  in Xenia Hotels Resorts on October 22, 2024 and sell it today you would earn a total of  141.00  from holding Xenia Hotels Resorts or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.0%
Values	Daily Returns

Consolidated Communications Ho  vs.  Xenia Hotels Resorts

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xenia Hotels Resorts

Risk-Adjusted Performance

7 of 100

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.

Pair Trading with Consolidated Communications and Xenia Hotels

The main advantage of trading using opposite Consolidated Communications and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated 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 Consolidated Communications Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.