Correlation Between Dairy Farm and Xenia Hotels

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

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

Diversification Opportunities for Dairy Farm and Xenia Hotels

0.6

Correlation Coefficient

Dairy Farm  Xenia Hotels

Poor diversification

The 3 months correlation between Dairy and Xenia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts and Dairy Farm 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 Dairy Farm International are associated (or correlated) with Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of Dairy Farm i.e., Dairy Farm and Xenia Hotels go up and down completely randomly.

Pair Corralation between Dairy Farm and Xenia Hotels

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Xenia Hotels. In addition to that, Dairy Farm is 1.37 times more volatile than Xenia Hotels Resorts. It trades about 0.0 of its total potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.04 per unit of volatility. If you would invest  1,118  in Xenia Hotels Resorts on October 3, 2024 and sell it today you would earn a total of  282.00  from holding Xenia Hotels Resorts or generate 25.22% return on investment over 90 days.

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

Dairy Farm International  vs.  Xenia Hotels Resorts

Dairy Farm International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Xenia Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Xenia Hotels is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dairy Farm and Xenia Hotels

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

The idea behind Dairy Farm International and Xenia Hotels Resorts 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..