Correlation Between Diamondrock Hospitality and Boyaa Interactive
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality and Boyaa Interactive 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 Boyaa Interactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamondrock Hospitality Co and Boyaa Interactive International, you can compare the effects of market volatilities on Diamondrock Hospitality and Boyaa Interactive 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 Boyaa Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Boyaa Interactive.
Diversification Opportunities for Diamondrock Hospitality and Boyaa Interactive
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diamondrock and Boyaa is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality Co and Boyaa Interactive Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyaa Interactive 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 Co are associated (or correlated) with Boyaa Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyaa Interactive has no effect on the direction of Diamondrock Hospitality i.e., Diamondrock Hospitality and Boyaa Interactive go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Boyaa Interactive
Assuming the 90 days trading horizon Diamondrock Hospitality is expected to generate 27.85 times less return on investment than Boyaa Interactive. But when comparing it to its historical volatility, Diamondrock Hospitality Co is 3.57 times less risky than Boyaa Interactive. It trades about 0.01 of its potential returns per unit of risk. Boyaa Interactive International is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3.47 in Boyaa Interactive International on August 30, 2024 and sell it today you would earn a total of 52.53 from holding Boyaa Interactive International or generate 1513.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Diamondrock Hospitality Co vs. Boyaa Interactive Internationa
Performance |
| Timeline |
| Diamondrock Hospitality |
| Boyaa Interactive |
Diamondrock Hospitality and Boyaa Interactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Boyaa Interactive
The main advantage of trading using opposite Diamondrock Hospitality and Boyaa Interactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality position performs unexpectedly, Boyaa Interactive 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 Boyaa Interactive will offset losses from the drop in Boyaa Interactive's long position.The idea behind Diamondrock Hospitality Co and Boyaa Interactive International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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