Correlation Between DLH Holdings and Target Hospitality

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Can any of the company-specific risk be diversified away by investing in both DLH Holdings and Target 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 DLH Holdings and Target Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DLH Holdings Corp and Target Hospitality Corp, you can compare the effects of market volatilities on DLH Holdings and Target 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 DLH Holdings with a short position of Target Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and Target Hospitality.

Diversification Opportunities for DLH Holdings and Target Hospitality

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between DLH and Target is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Target Hospitality Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Hospitality Corp and DLH Holdings 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 DLH Holdings Corp are associated (or correlated) with Target Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Hospitality Corp has no effect on the direction of DLH Holdings i.e., DLH Holdings and Target Hospitality go up and down completely randomly.

Pair Corralation between DLH Holdings and Target Hospitality

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the Target Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, DLH Holdings Corp is 1.52 times less risky than Target Hospitality. The stock trades about -0.22 of its potential returns per unit of risk. The Target Hospitality Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  836.00  in Target Hospitality Corp on September 18, 2024 and sell it today you would earn a total of  115.00  from holding Target Hospitality Corp or generate 13.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DLH Holdings Corp  vs.  Target Hospitality Corp

 Performance 
       Timeline  
DLH Holdings Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Target Hospitality Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Target Hospitality Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Target Hospitality is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

DLH Holdings and Target Hospitality Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DLH Holdings and Target Hospitality

The main advantage of trading using opposite DLH Holdings and Target Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DLH Holdings position performs unexpectedly, Target 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 Target Hospitality will offset losses from the drop in Target Hospitality's long position.
The idea behind DLH Holdings Corp and Target Hospitality Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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