Correlation Between InnSuites Hospitality and Chatham Lodging

Can any of the company-specific risk be diversified away by investing in both InnSuites Hospitality and Chatham Lodging 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 InnSuites Hospitality and Chatham Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between InnSuites Hospitality Trust and Chatham Lodging Trust, you can compare the effects of market volatilities on InnSuites Hospitality and Chatham Lodging 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 InnSuites Hospitality with a short position of Chatham Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of InnSuites Hospitality and Chatham Lodging.

Diversification Opportunities for InnSuites Hospitality and Chatham Lodging

0.7

Correlation Coefficient

InnSuites Hospitality  Chatham Lodging

Poor diversification

The 3 months correlation between InnSuites and Chatham is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding InnSuites Hospitality Trust and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging Trust and InnSuites Hospitality 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 InnSuites Hospitality Trust are associated (or correlated) with Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of InnSuites Hospitality i.e., InnSuites Hospitality and Chatham Lodging go up and down completely randomly.

Pair Corralation between InnSuites Hospitality and Chatham Lodging

Considering the 90-day investment horizon InnSuites Hospitality Trust is expected to generate 34.21 times more return on investment than Chatham Lodging. However, InnSuites Hospitality is 34.21 times more volatile than Chatham Lodging Trust. It trades about 0.06 of its potential returns per unit of risk. Chatham Lodging Trust is currently generating about -0.03 per unit of risk. If you would invest  135.00  in InnSuites Hospitality Trust on October 9, 2024 and sell it today you would earn a total of  124.00  from holding InnSuites Hospitality Trust or generate 91.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

InnSuites Hospitality Trust  vs.  Chatham Lodging Trust

InnSuites Hospitality

Risk-Adjusted Performance

11 of 100

Good

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

Chatham Lodging Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Lodging Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Chatham Lodging is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with InnSuites Hospitality and Chatham Lodging

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

The idea behind InnSuites Hospitality Trust and Chatham Lodging Trust 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.