Correlation Between Hyatt Hotels and Six Flags

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

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

Diversification Opportunities for Hyatt Hotels and Six Flags

0.62

Correlation Coefficient

Hyatt Hotels  Six Flags

Poor diversification

The 3 months correlation between Hyatt and Six is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hyatt Hotels and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment and Hyatt 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 Hyatt Hotels are associated (or correlated) with Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Hyatt Hotels i.e., Hyatt Hotels and Six Flags go up and down completely randomly.

Pair Corralation between Hyatt Hotels and Six Flags

Taking into account the 90-day investment horizon Hyatt Hotels is expected to generate 8.71 times less return on investment than Six Flags. But when comparing it to its historical volatility, Hyatt Hotels is 1.35 times less risky than Six Flags. It trades about 0.01 of its potential returns per unit of risk. Six Flags Entertainment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,781  in Six Flags Entertainment on October 9, 2024 and sell it today you would earn a total of  1,007  from holding Six Flags Entertainment or generate 26.63% return on investment over 90 days.

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

Hyatt Hotels  vs.  Six Flags Entertainment

Hyatt Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyatt Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Hyatt Hotels is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Six Flags Entertainment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Six Flags Entertainment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Six Flags displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyatt Hotels and Six Flags

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

The idea behind Hyatt Hotels and Six Flags Entertainment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.