Correlation Between Diamondrock Hospitality and Chatham Lodging
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality and Chatham Lodging 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 Chatham Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamondrock Hospitality and Chatham Lodging Trust, you can compare the effects of market volatilities on Diamondrock Hospitality and Chatham Lodging 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 Chatham Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Chatham Lodging.
Diversification Opportunities for Diamondrock Hospitality and Chatham Lodging
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamondrock and Chatham is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging Trust 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 Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of Diamondrock Hospitality i.e., Diamondrock Hospitality and Chatham Lodging go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Chatham Lodging
Considering the 90-day investment horizon Diamondrock Hospitality is expected to generate 3.15 times less return on investment than Chatham Lodging. But when comparing it to its historical volatility, Diamondrock Hospitality is 1.51 times less risky than Chatham Lodging. It trades about 0.09 of its potential returns per unit of risk. Chatham Lodging Trust is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 825.00 in Chatham Lodging Trust on August 29, 2024 and sell it today you would earn a total of 100.00 from holding Chatham Lodging Trust or generate 12.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamondrock Hospitality vs. Chatham Lodging Trust
Performance |
| Timeline |
| Diamondrock Hospitality |
| Chatham Lodging Trust |
Diamondrock Hospitality and Chatham Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Chatham Lodging
The main advantage of trading using opposite Diamondrock Hospitality and Chatham Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality position performs unexpectedly, Chatham Lodging 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 Chatham Lodging will offset losses from the drop in Chatham Lodging's long position.| Diamondrock Hospitality vs. Summit Hotel Properties | Diamondrock Hospitality vs. RLJ Lodging Trust | Diamondrock Hospitality vs. Pebblebrook Hotel Trust | Diamondrock Hospitality vs. Sunstone Hotel Investors |
| Chatham Lodging vs. Summit Hotel Properties | Chatham Lodging vs. RLJ Lodging Trust | Chatham Lodging vs. Pebblebrook Hotel Trust | Chatham Lodging vs. Whitestone REIT |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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