Correlation Between Science Applications and Xenia Hotels
Can any of the company-specific risk be diversified away by investing in both Science Applications and Xenia Hotels 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 Science Applications and Xenia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and Xenia Hotels Resorts, you can compare the effects of market volatilities on Science Applications and Xenia Hotels 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 Science Applications with a short position of Xenia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Xenia Hotels.
Diversification Opportunities for Science Applications and Xenia Hotels
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Science and Xenia is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts and Science Applications 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 Science Applications International are associated (or correlated) with Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of Science Applications i.e., Science Applications and Xenia Hotels go up and down completely randomly.
Pair Corralation between Science Applications and Xenia Hotels
Assuming the 90 days trading horizon Science Applications International is expected to under-perform the Xenia Hotels. In addition to that, Science Applications is 1.6 times more volatile than Xenia Hotels Resorts. It trades about -0.12 of its total potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.2 per unit of volatility. If you would invest 1,330 in Xenia Hotels Resorts on August 29, 2024 and sell it today you would earn a total of 150.00 from holding Xenia Hotels Resorts or generate 11.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Science Applications Internati vs. Xenia Hotels Resorts
Performance |
| Timeline |
| Science Applications |
| Xenia Hotels Resorts |
Science Applications and Xenia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Applications and Xenia Hotels
The main advantage of trading using opposite Science Applications and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, Xenia Hotels 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 Xenia Hotels will offset losses from the drop in Xenia Hotels' long position.| Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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