Correlation Between BP Prudhoe and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both BP Prudhoe 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 BP Prudhoe and Diamondrock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Prudhoe Bay and Diamondrock Hospitality Co, you can compare the effects of market volatilities on BP Prudhoe 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 BP Prudhoe with a short position of Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Prudhoe and Diamondrock Hospitality.
Diversification Opportunities for BP Prudhoe and Diamondrock Hospitality
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BMI and Diamondrock is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BP Prudhoe Bay and Diamondrock Hospitality Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality and BP Prudhoe 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 BP Prudhoe Bay 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 BP Prudhoe i.e., BP Prudhoe and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between BP Prudhoe and Diamondrock Hospitality
Assuming the 90 days horizon BP Prudhoe is expected to generate 2.02 times less return on investment than Diamondrock Hospitality. In addition to that, BP Prudhoe is 4.09 times more volatile than Diamondrock Hospitality Co. It trades about 0.02 of its total potential returns per unit of risk. Diamondrock Hospitality Co is currently generating about 0.13 per unit of volatility. If you would invest 820.00 in Diamondrock Hospitality Co on August 29, 2024 and sell it today you would earn a total of 55.00 from holding Diamondrock Hospitality Co or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP Prudhoe Bay vs. Diamondrock Hospitality Co
Performance |
| Timeline |
| BP Prudhoe Bay |
| Diamondrock Hospitality |
BP Prudhoe and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Prudhoe and Diamondrock Hospitality
The main advantage of trading using opposite BP Prudhoe and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Prudhoe 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.| BP Prudhoe vs. REVO INSURANCE SPA | BP Prudhoe vs. Dalata Hotel Group | BP Prudhoe vs. Insurance Australia Group | BP Prudhoe vs. HANOVER INSURANCE |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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