Correlation Between Target Hospitality and SPAR

Can any of the company-specific risk be diversified away by investing in both Target Hospitality and SPAR 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 SPAR 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 SPAR Group, you can compare the effects of market volatilities on Target Hospitality and SPAR 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 SPAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Hospitality and SPAR.

Diversification Opportunities for Target Hospitality and SPAR

-0.32

Correlation Coefficient

Target Hospitality  SPAR

Very good diversification

The 3 months correlation between Target and SPAR is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Target Hospitality Corp and SPAR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPAR Group 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 SPAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPAR Group has no effect on the direction of Target Hospitality i.e., Target Hospitality and SPAR go up and down completely randomly.

Pair Corralation between Target Hospitality and SPAR

Allowing for the 90-day total investment horizon Target Hospitality Corp is expected to under-perform the SPAR. But the stock apears to be less risky and, when comparing its historical volatility, Target Hospitality Corp is 1.35 times less risky than SPAR. The stock trades about -0.02 of its potential returns per unit of risk. The SPAR Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  131.00  in SPAR Group on August 31, 2024 and sell it today you would earn a total of  92.00  from holding SPAR Group or generate 70.23% return on investment over 90 days.

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

Target Hospitality Corp  vs.  SPAR Group

Target Hospitality Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Hospitality Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

SPAR Group

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days SPAR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Target Hospitality and SPAR

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

The idea behind Target Hospitality Corp and SPAR Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.