Correlation Between Chatham Lodging and Hannon Armstrong

Can any of the company-specific risk be diversified away by investing in both Chatham Lodging and Hannon Armstrong 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 Chatham Lodging and Hannon Armstrong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chatham Lodging Trust and Hannon Armstrong Sustainable, you can compare the effects of market volatilities on Chatham Lodging and Hannon Armstrong 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 Chatham Lodging with a short position of Hannon Armstrong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chatham Lodging and Hannon Armstrong.

Diversification Opportunities for Chatham Lodging and Hannon Armstrong

-0.81

Correlation Coefficient

Chatham Lodging  Hannon Armstrong

Pay attention - limited upside

The 3 months correlation between Chatham and Hannon is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Lodging Trust and Hannon Armstrong Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannon Armstrong Sus and Chatham Lodging 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 Chatham Lodging Trust are associated (or correlated) with Hannon Armstrong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannon Armstrong Sus has no effect on the direction of Chatham Lodging i.e., Chatham Lodging and Hannon Armstrong go up and down completely randomly.

Pair Corralation between Chatham Lodging and Hannon Armstrong

Given the investment horizon of 90 days Chatham Lodging Trust is expected to under-perform the Hannon Armstrong. But the stock apears to be less risky and, when comparing its historical volatility, Chatham Lodging Trust is 1.16 times less risky than Hannon Armstrong. The stock trades about -0.22 of its potential returns per unit of risk. The Hannon Armstrong Sustainable is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,671  in Hannon Armstrong Sustainable on December 29, 2024 and sell it today you would earn a total of  264.00  from holding Hannon Armstrong Sustainable or generate 9.88% return on investment over 90 days.

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

Chatham Lodging Trust  vs.  Hannon Armstrong Sustainable

Chatham Lodging Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chatham Lodging Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hannon Armstrong Sus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannon Armstrong Sustainable are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Hannon Armstrong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chatham Lodging and Hannon Armstrong

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

The idea behind Chatham Lodging Trust and Hannon Armstrong Sustainable 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.