Correlation Between DiamondRock Hospitality and US Bancorp
Can any of the company-specific risk be diversified away by investing in both DiamondRock Hospitality and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DiamondRock Hospitality and US Bancorp, you can compare the effects of market volatilities on DiamondRock Hospitality and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DiamondRock Hospitality and US Bancorp.
Diversification Opportunities for DiamondRock Hospitality and US Bancorp
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DiamondRock and UB5 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding DiamondRock Hospitality and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of DiamondRock Hospitality i.e., DiamondRock Hospitality and US Bancorp go up and down completely randomly.
Pair Corralation between DiamondRock Hospitality and US Bancorp
Assuming the 90 days horizon DiamondRock Hospitality is expected to generate 3.52 times more return on investment than US Bancorp. However, DiamondRock Hospitality is 3.52 times more volatile than US Bancorp. It trades about 0.08 of its potential returns per unit of risk. US Bancorp is currently generating about 0.26 per unit of risk. If you would invest 810.00 in DiamondRock Hospitality on August 29, 2024 and sell it today you would earn a total of 65.00 from holding DiamondRock Hospitality or generate 8.02% 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. US Bancorp
Performance |
| Timeline |
| DiamondRock Hospitality |
| US Bancorp |
DiamondRock Hospitality and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DiamondRock Hospitality and US Bancorp
The main advantage of trading using opposite DiamondRock Hospitality and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DiamondRock Hospitality position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| DiamondRock Hospitality vs. BANKINTER ADR 2007 | DiamondRock Hospitality vs. SOFTBANK P ADR | DiamondRock Hospitality vs. ELMOS SEMICONDUCTOR | DiamondRock Hospitality vs. The Hanover Insurance |
| US Bancorp vs. Superior Plus Corp | US Bancorp vs. NMI Holdings | US Bancorp vs. Origin Agritech | US Bancorp vs. SIVERS SEMICONDUCTORS AB |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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