Correlation Between SEB SA and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both SEB SA 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 SEB SA and Diamondrock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEB SA and Diamondrock Hospitality Co, you can compare the effects of market volatilities on SEB SA 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 SEB SA with a short position of Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEB SA and Diamondrock Hospitality.
Diversification Opportunities for SEB SA and Diamondrock Hospitality
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between SEB and Diamondrock is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SEB SA and Diamondrock Hospitality Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality and SEB SA 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 SEB SA 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 SEB SA i.e., SEB SA and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between SEB SA and Diamondrock Hospitality
Assuming the 90 days horizon SEB SA is expected to under-perform the Diamondrock Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, SEB SA is 1.14 times less risky than Diamondrock Hospitality. The stock trades about -0.01 of its potential returns per unit of risk. The Diamondrock Hospitality Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 772.00 in Diamondrock Hospitality Co on September 3, 2024 and sell it today you would earn a total of 93.00 from holding Diamondrock Hospitality Co or generate 12.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEB SA vs. Diamondrock Hospitality Co
Performance |
| Timeline |
| SEB SA |
| Diamondrock Hospitality |
SEB SA and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEB SA and Diamondrock Hospitality
The main advantage of trading using opposite SEB SA and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEB SA 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.| SEB SA vs. Diamondrock Hospitality Co | SEB SA vs. MYFAIR GOLD P | SEB SA vs. Ryanair Holdings plc | SEB SA vs. Ramsay Health Care |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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