Correlation Between CHINA EDUCATION and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both CHINA EDUCATION 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 CHINA EDUCATION and DiamondRock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA EDUCATION GROUP and DiamondRock Hospitality, you can compare the effects of market volatilities on CHINA EDUCATION 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 CHINA EDUCATION with a short position of DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and DiamondRock Hospitality.
Diversification Opportunities for CHINA EDUCATION and DiamondRock Hospitality
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CHINA and DiamondRock is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality and CHINA EDUCATION 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 CHINA EDUCATION GROUP 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 CHINA EDUCATION i.e., CHINA EDUCATION and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between CHINA EDUCATION and DiamondRock Hospitality
Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to under-perform the DiamondRock Hospitality. In addition to that, CHINA EDUCATION is 2.09 times more volatile than DiamondRock Hospitality. It trades about -0.1 of its total potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.34 per unit of volatility. If you would invest 835.00 in DiamondRock Hospitality on September 19, 2024 and sell it today you would earn a total of 85.00 from holding DiamondRock Hospitality or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA EDUCATION GROUP vs. DiamondRock Hospitality
Performance |
| Timeline |
| CHINA EDUCATION GROUP |
| DiamondRock Hospitality |
CHINA EDUCATION and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA EDUCATION and DiamondRock Hospitality
The main advantage of trading using opposite CHINA EDUCATION and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION 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.| CHINA EDUCATION vs. Apple Inc | CHINA EDUCATION vs. Apple Inc | CHINA EDUCATION vs. Apple Inc | CHINA EDUCATION 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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