Correlation Between Sea and Xenia Hotels
Can any of the company-specific risk be diversified away by investing in both Sea 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 Sea and Xenia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea Limited and Xenia Hotels Resorts, you can compare the effects of market volatilities on Sea 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 Sea with a short position of Xenia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Xenia Hotels.
Diversification Opportunities for Sea and Xenia Hotels
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sea and Xenia is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sea Limited 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 Sea 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 Sea Limited 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 Sea i.e., Sea and Xenia Hotels go up and down completely randomly.
Pair Corralation between Sea and Xenia Hotels
Assuming the 90 days horizon Sea Limited is expected to generate 1.1 times more return on investment than Xenia Hotels. However, Sea is 1.1 times more volatile than Xenia Hotels Resorts. It trades about 0.29 of its potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.19 per unit of risk. If you would invest 7,150 in Sea Limited on September 12, 2024 and sell it today you would earn a total of 3,670 from holding Sea Limited or generate 51.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea Limited vs. Xenia Hotels Resorts
Performance |
| Timeline |
| Sea Limited |
| Xenia Hotels Resorts |
Sea and Xenia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Xenia Hotels
The main advantage of trading using opposite Sea and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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.| Sea vs. ATRYS HEALTH SA | Sea vs. Strategic Education | Sea vs. TAL Education Group | Sea vs. DeVry Education Group |
| Xenia Hotels vs. Host Hotels Resorts | Xenia Hotels vs. Sunstone Hotel Investors | Xenia Hotels vs. Summit Hotel Properties | Xenia Hotels vs. ASHFORD HOSPITTRUST |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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