Correlation Between Country Club and EIH Associated

Can any of the company-specific risk be diversified away by investing in both Country Club and EIH Associated 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 Country Club and EIH Associated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Country Club Hospitality and EIH Associated Hotels, you can compare the effects of market volatilities on Country Club and EIH Associated 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 Country Club with a short position of EIH Associated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Country Club and EIH Associated.

Diversification Opportunities for Country Club and EIH Associated

0.12

Correlation Coefficient

Country Club  EIH Associated

Average diversification

The 3 months correlation between Country and EIH is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Country Club Hospitality and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels and Country Club 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 Country Club Hospitality are associated (or correlated) with EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of Country Club i.e., Country Club and EIH Associated go up and down completely randomly.

Pair Corralation between Country Club and EIH Associated

Assuming the 90 days trading horizon Country Club Hospitality is expected to generate 0.99 times more return on investment than EIH Associated. However, Country Club Hospitality is 1.01 times less risky than EIH Associated. It trades about 0.05 of its potential returns per unit of risk. EIH Associated Hotels is currently generating about -0.02 per unit of risk. If you would invest  1,912  in Country Club Hospitality on October 22, 2024 and sell it today you would earn a total of  43.00  from holding Country Club Hospitality or generate 2.25% return on investment over 90 days.

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

Country Club Hospitality  vs.  EIH Associated Hotels

Country Club Hospitality

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Country Club Hospitality are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical indicators, Country Club may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EIH Associated Hotels

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, EIH Associated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Country Club and EIH Associated

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

The idea behind Country Club Hospitality and EIH Associated Hotels 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.