Correlation Between Grand Canyon and Xenia Hotels

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

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

Diversification Opportunities for Grand Canyon and Xenia Hotels

0.84

Correlation Coefficient

Grand Canyon  Xenia Hotels

Very poor diversification

The 3 months correlation between Grand and Xenia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education 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 Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Xenia Hotels go up and down completely randomly.

Pair Corralation between Grand Canyon and Xenia Hotels

Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 0.54 times more return on investment than Xenia Hotels. However, Grand Canyon Education is 1.84 times less risky than Xenia Hotels. It trades about -0.08 of its potential returns per unit of risk. Xenia Hotels Resorts is currently generating about -0.09 per unit of risk. If you would invest  15,800  in Grand Canyon Education on October 4, 2024 and sell it today you would lose (300.00) from holding Grand Canyon Education or give up 1.9% of portfolio value over 90 days.

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

Grand Canyon Education  vs.  Xenia Hotels Resorts

Grand Canyon Education

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xenia Hotels Resorts

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Xenia Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grand Canyon and Xenia Hotels

The main advantage of trading using opposite Grand Canyon and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.