Correlation Between Daito Trust and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both Daito Trust 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 Daito Trust and DiamondRock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daito Trust Construction and DiamondRock Hospitality, you can compare the effects of market volatilities on Daito Trust 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 Daito Trust with a short position of DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and DiamondRock Hospitality.
Diversification Opportunities for Daito Trust and DiamondRock Hospitality
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daito and DiamondRock is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality and Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between Daito Trust and DiamondRock Hospitality
Assuming the 90 days horizon Daito Trust is expected to generate 1.63 times less return on investment than DiamondRock Hospitality. In addition to that, Daito Trust is 1.03 times more volatile than DiamondRock Hospitality. It trades about 0.04 of its total potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.06 per unit of volatility. If you would invest 875.00 in DiamondRock Hospitality on September 23, 2024 and sell it today you would earn a total of 15.00 from holding DiamondRock Hospitality or generate 1.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daito Trust Construction vs. DiamondRock Hospitality
Performance |
| Timeline |
| Daito Trust Construction |
| DiamondRock Hospitality |
Daito Trust and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daito Trust and DiamondRock Hospitality
The main advantage of trading using opposite Daito Trust and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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.| Daito Trust vs. COSTAR GROUP INC | Daito Trust vs. CBRE Group Class | Daito Trust vs. VONOVIA SE ADR | Daito Trust vs. Vonovia SE |
| DiamondRock Hospitality vs. EBRO FOODS | DiamondRock Hospitality vs. alstria office REIT AG | DiamondRock Hospitality vs. Thai Beverage Public | DiamondRock Hospitality vs. CENTURIA OFFICE REIT |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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