Correlation Between Target Hospitality and DLH Holdings

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

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

Diversification Opportunities for Target Hospitality and DLH Holdings

0.34

Correlation Coefficient

Target Hospitality  DLH Holdings

Weak diversification

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

Pair Corralation between Target Hospitality and DLH Holdings

Allowing for the 90-day total investment horizon Target Hospitality Corp is expected to generate 1.59 times more return on investment than DLH Holdings. However, Target Hospitality is 1.59 times more volatile than DLH Holdings Corp. It trades about 0.01 of its potential returns per unit of risk. DLH Holdings Corp is currently generating about -0.15 per unit of risk. If you would invest  968.00  in Target Hospitality Corp on September 18, 2024 and sell it today you would lose (14.00) from holding Target Hospitality Corp or give up 1.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Target Hospitality Corp  vs.  DLH Holdings Corp

Target Hospitality Corp

Risk-Adjusted Performance

1 of 100

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 Corp

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Target Hospitality and DLH Holdings

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

The idea behind Target Hospitality Corp and DLH Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.