Correlation Between Chatham Lodging and Service Properties
Can any of the company-specific risk be diversified away by investing in both Chatham Lodging and Service Properties 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 Chatham Lodging and Service Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chatham Lodging Trust and Service Properties Trust, you can compare the effects of market volatilities on Chatham Lodging and Service Properties 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 Chatham Lodging with a short position of Service Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chatham Lodging and Service Properties.
Diversification Opportunities for Chatham Lodging and Service Properties
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chatham and Service is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Lodging Trust and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust and Chatham Lodging 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 Chatham Lodging Trust are associated (or correlated) with Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Chatham Lodging i.e., Chatham Lodging and Service Properties go up and down completely randomly.
Pair Corralation between Chatham Lodging and Service Properties
Given the investment horizon of 90 days Chatham Lodging Trust is expected to under-perform the Service Properties. But the stock apears to be less risky and, when comparing its historical volatility, Chatham Lodging Trust is 1.77 times less risky than Service Properties. The stock trades about -0.06 of its potential returns per unit of risk. The Service Properties Trust is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 250.00 in Service Properties Trust on November 2, 2024 and sell it today you would earn a total of 36.00 from holding Service Properties Trust or generate 14.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chatham Lodging Trust vs. Service Properties Trust
Performance |
| Timeline |
| Chatham Lodging Trust |
| Service Properties Trust |
Chatham Lodging and Service Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chatham Lodging and Service Properties
The main advantage of trading using opposite Chatham Lodging and Service Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chatham Lodging position performs unexpectedly, Service Properties 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 Service Properties will offset losses from the drop in Service Properties' long position.| Chatham Lodging vs. Summit Hotel Properties | Chatham Lodging vs. RLJ Lodging Trust | Chatham Lodging vs. Pebblebrook Hotel Trust | Chatham Lodging vs. Whitestone REIT |
| Service Properties vs. EMCOR Group | Service Properties vs. Coty Inc | Service Properties vs. Hafnia Limited | Service Properties vs. Parker Hannifin |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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