Correlation Between HOSPITALITY and Valens

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

By analyzing existing cross correlation between HOSPITALITY PPTYS TR and Valens, you can compare the effects of market volatilities on HOSPITALITY and Valens 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 HOSPITALITY with a short position of Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOSPITALITY and Valens.

Diversification Opportunities for HOSPITALITY and Valens

0.19

Correlation Coefficient

HOSPITALITY  Valens

Average diversification

The 3 months correlation between HOSPITALITY and Valens is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding HOSPITALITY PPTYS TR and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens and 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 HOSPITALITY PPTYS TR are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of HOSPITALITY i.e., HOSPITALITY and Valens go up and down completely randomly.

Pair Corralation between HOSPITALITY and Valens

Assuming the 90 days trading horizon HOSPITALITY PPTYS TR is expected to generate 0.11 times more return on investment than Valens. However, HOSPITALITY PPTYS TR is 9.09 times less risky than Valens. It trades about -0.02 of its potential returns per unit of risk. Valens is currently generating about -0.17 per unit of risk. If you would invest  9,720  in HOSPITALITY PPTYS TR on December 2, 2024 and sell it today you would lose (29.00) from holding HOSPITALITY PPTYS TR or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

HOSPITALITY PPTYS TR  vs.  Valens

HOSPITALITY PPTYS

Risk-Adjusted Performance

Very Weak

Over the last 90 days HOSPITALITY PPTYS TR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HOSPITALITY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Valens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HOSPITALITY and Valens

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

The idea behind HOSPITALITY PPTYS TR and Valens 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.