Correlation Between Xenia Hotels and Diamondrock Hospitality

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

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

Diversification Opportunities for Xenia Hotels and Diamondrock Hospitality

0.94

Correlation Coefficient

Xenia Hotels  Diamondrock Hospitality

Almost no diversification

The 3 months correlation between Xenia and Diamondrock is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts and Diamondrock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality and Xenia Hotels 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 Xenia Hotels Resorts are associated (or correlated) with Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of Xenia Hotels i.e., Xenia Hotels and Diamondrock Hospitality go up and down completely randomly.

Pair Corralation between Xenia Hotels and Diamondrock Hospitality

Considering the 90-day investment horizon Xenia Hotels Resorts is expected to generate 1.14 times more return on investment than Diamondrock Hospitality. However, Xenia Hotels is 1.14 times more volatile than Diamondrock Hospitality. It trades about 0.09 of its potential returns per unit of risk. Diamondrock Hospitality is currently generating about 0.08 per unit of risk. If you would invest  1,389  in Xenia Hotels Resorts on August 31, 2024 and sell it today you would earn a total of  146.00  from holding Xenia Hotels Resorts or generate 10.51% return on investment over 90 days.

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

Xenia Hotels Resorts  vs.  Diamondrock Hospitality

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.

Diamondrock Hospitality

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamondrock Hospitality are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Diamondrock Hospitality may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Xenia Hotels and Diamondrock Hospitality

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

The idea behind Xenia Hotels Resorts and Diamondrock Hospitality 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.