Correlation Between STAG Industrial and Xenia Hotels

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

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

Diversification Opportunities for STAG Industrial and Xenia Hotels

-0.56

Correlation Coefficient

STAG Industrial  Xenia Hotels

Excellent diversification

The 3 months correlation between STAG and Xenia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding STAG Industrial 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 STAG Industrial 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 STAG Industrial 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 STAG Industrial i.e., STAG Industrial and Xenia Hotels go up and down completely randomly.

Pair Corralation between STAG Industrial and Xenia Hotels

Given the investment horizon of 90 days STAG Industrial is expected to under-perform the Xenia Hotels. But the stock apears to be less risky and, when comparing its historical volatility, STAG Industrial is 1.7 times less risky than Xenia Hotels. The stock trades about -0.03 of its potential returns per unit of risk. The Xenia Hotels Resorts is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,466  in Xenia Hotels Resorts on August 31, 2024 and sell it today you would earn a total of  69.00  from holding Xenia Hotels Resorts or generate 4.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

STAG Industrial  vs.  Xenia Hotels Resorts

STAG Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STAG Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Xenia Hotels Resorts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with STAG Industrial and Xenia Hotels

The main advantage of trading using opposite STAG Industrial and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STAG Industrial 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 STAG Industrial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.