Correlation Between DiamondRock Hospitality and Sotherly Hotels
Can any of the company-specific risk be diversified away by investing in both DiamondRock Hospitality and Sotherly 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 DiamondRock Hospitality and Sotherly Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DiamondRock Hospitality and Sotherly Hotels, you can compare the effects of market volatilities on DiamondRock Hospitality and Sotherly 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 DiamondRock Hospitality with a short position of Sotherly Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of DiamondRock Hospitality and Sotherly Hotels.
Diversification Opportunities for DiamondRock Hospitality and Sotherly Hotels
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between DiamondRock and Sotherly is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding DiamondRock Hospitality and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and DiamondRock Hospitality 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 DiamondRock Hospitality are associated (or correlated) with Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of DiamondRock Hospitality i.e., DiamondRock Hospitality and Sotherly Hotels go up and down completely randomly.
Pair Corralation between DiamondRock Hospitality and Sotherly Hotels
Assuming the 90 days trading horizon DiamondRock Hospitality is expected to generate 10.27 times less return on investment than Sotherly Hotels. But when comparing it to its historical volatility, DiamondRock Hospitality is 5.5 times less risky than Sotherly Hotels. It trades about 0.05 of its potential returns per unit of risk. Sotherly Hotels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 79.00 in Sotherly Hotels on December 1, 2024 and sell it today you would earn a total of 3.00 from holding Sotherly Hotels or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DiamondRock Hospitality vs. Sotherly Hotels
Performance |
| Timeline |
| DiamondRock Hospitality |
| Sotherly Hotels |
DiamondRock Hospitality and Sotherly Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DiamondRock Hospitality and Sotherly Hotels
The main advantage of trading using opposite DiamondRock Hospitality and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DiamondRock Hospitality position performs unexpectedly, Sotherly 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 Sotherly Hotels will offset losses from the drop in Sotherly Hotels' long position.| DiamondRock Hospitality vs. Braemar Hotels Resorts | DiamondRock Hospitality vs. Summit Hotel Properties |
| Sotherly Hotels vs. Summit Hotel Properties | Sotherly Hotels vs. Diamondrock Hospitality | Sotherly Hotels vs. RLJ Lodging Trust | Sotherly Hotels vs. Chatham Lodging Trust |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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