Correlation Between American Healthcare and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both American Healthcare 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 American Healthcare and Diamondrock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Healthcare REIT, and Diamondrock Hospitality, you can compare the effects of market volatilities on American Healthcare 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 American Healthcare with a short position of Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Healthcare and Diamondrock Hospitality.
Diversification Opportunities for American Healthcare and Diamondrock Hospitality
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Diamondrock is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT, and Diamondrock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality and American Healthcare 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 American Healthcare REIT, 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 American Healthcare i.e., American Healthcare and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between American Healthcare and Diamondrock Hospitality
Considering the 90-day investment horizon American Healthcare REIT, is expected to generate 1.13 times more return on investment than Diamondrock Hospitality. However, American Healthcare is 1.13 times more volatile than Diamondrock Hospitality. It trades about 0.25 of its potential returns per unit of risk. Diamondrock Hospitality is currently generating about 0.13 per unit of risk. If you would invest 2,596 in American Healthcare REIT, on August 27, 2024 and sell it today you would earn a total of 300.00 from holding American Healthcare REIT, or generate 11.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Healthcare REIT, vs. Diamondrock Hospitality
Performance |
| Timeline |
| American Healthcare REIT, |
| Diamondrock Hospitality |
American Healthcare and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Healthcare and Diamondrock Hospitality
The main advantage of trading using opposite American Healthcare and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Healthcare 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.| American Healthcare vs. Marfrig Global Foods | American Healthcare vs. Custom Truck One | American Healthcare vs. Lendlease Global Commercial | American Healthcare vs. Fortress Transp Infra |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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