Correlation Between Chatham Lodging and Hersha Hospitality

Can any of the company-specific risk be diversified away by investing in both Chatham Lodging and Hersha Hospitality 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 Hersha Hospitality 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 Hersha Hospitality Trust, you can compare the effects of market volatilities on Chatham Lodging and Hersha Hospitality 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 Hersha Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chatham Lodging and Hersha Hospitality.

Diversification Opportunities for Chatham Lodging and Hersha Hospitality

0.0

Correlation Coefficient

Chatham Lodging  Hersha Hospitality

Pay attention - limited upside

The 3 months correlation between Chatham and Hersha is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Lodging Trust and Hersha Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hersha Hospitality Trust 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 Hersha Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hersha Hospitality Trust has no effect on the direction of Chatham Lodging i.e., Chatham Lodging and Hersha Hospitality go up and down completely randomly.

Pair Corralation between Chatham Lodging and Hersha Hospitality

If you would invest (100.00) in Hersha Hospitality Trust on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Hersha Hospitality Trust or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Chatham Lodging Trust  vs.  Hersha Hospitality Trust

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.

Hersha Hospitality Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hersha Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hersha Hospitality is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chatham Lodging and Hersha Hospitality

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

The idea behind Chatham Lodging Trust and Hersha Hospitality Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.