Correlation Between Dan Hotels and Payton L

Can any of the company-specific risk be diversified away by investing in both Dan Hotels and Payton L 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 Dan Hotels and Payton L into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Dan Hotels and Payton L

-0.57

Correlation Coefficient

Dan Hotels  Payton L

Excellent diversification

The 3 months correlation between Dan and Payton is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dan Hotels and Payton L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payton L and Dan Hotels 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 Dan Hotels are associated (or correlated) with Payton L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payton L has no effect on the direction of Dan Hotels i.e., Dan Hotels and Payton L go up and down completely randomly.

Pair Corralation between Dan Hotels and Payton L

Assuming the 90 days trading horizon Dan Hotels is expected to generate 8.06 times less return on investment than Payton L. But when comparing it to its historical volatility, Dan Hotels is 1.16 times less risky than Payton L. It trades about 0.02 of its potential returns per unit of risk. Payton L is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  640,000  in Payton L on September 12, 2024 and sell it today you would earn a total of  87,400  from holding Payton L or generate 13.66% return on investment over 90 days.

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

Dan Hotels  vs.  Payton L

Dan Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dan Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dan Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Payton L

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Payton L are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Payton L sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dan Hotels and Payton L

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

The idea behind Dan Hotels and Payton L 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.