Correlation Between Defiance Hotel and X Square

Can any of the company-specific risk be diversified away by investing in both Defiance Hotel and X Square 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 Defiance Hotel and X Square into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Defiance Hotel Airline and X Square Balanced, you can compare the effects of market volatilities on Defiance Hotel and X Square 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 Defiance Hotel with a short position of X Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Hotel and X Square.

Diversification Opportunities for Defiance Hotel and X Square

0.66

Correlation Coefficient

Defiance Hotel  X Square

Poor diversification

The 3 months correlation between Defiance and SQBFX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Hotel Airline and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced and Defiance Hotel 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 Defiance Hotel Airline are associated (or correlated) with X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of Defiance Hotel i.e., Defiance Hotel and X Square go up and down completely randomly.

Pair Corralation between Defiance Hotel and X Square

Given the investment horizon of 90 days Defiance Hotel Airline is expected to generate 1.41 times more return on investment than X Square. However, Defiance Hotel is 1.41 times more volatile than X Square Balanced. It trades about -0.09 of its potential returns per unit of risk. X Square Balanced is currently generating about -0.23 per unit of risk. If you would invest  2,698  in Defiance Hotel Airline on October 17, 2024 and sell it today you would lose (53.00) from holding Defiance Hotel Airline or give up 1.96% of portfolio value over 90 days.

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

Defiance Hotel Airline  vs.  X Square Balanced

Defiance Hotel Airline

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Hotel Airline are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Defiance Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

X Square Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X Square Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, X Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Defiance Hotel and X Square

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

The idea behind Defiance Hotel Airline and X Square Balanced 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.

Check out your portfolio center.

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.