Correlation Between Diamondrock Hospitality and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Limited, you can compare the effects of market volatilities on Diamondrock Hospitality and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Canadian Utilities.
Diversification Opportunities for Diamondrock Hospitality and Canadian Utilities
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Diamondrock and Canadian is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality Co and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Diamondrock Hospitality i.e., Diamondrock Hospitality and Canadian Utilities go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Canadian Utilities
Assuming the 90 days trading horizon Diamondrock Hospitality is expected to generate 4.2 times less return on investment than Canadian Utilities. In addition to that, Diamondrock Hospitality is 1.53 times more volatile than Canadian Utilities Limited. It trades about 0.01 of its total potential returns per unit of risk. Canadian Utilities Limited is currently generating about 0.09 per unit of volatility. If you would invest 1,972 in Canadian Utilities Limited on August 28, 2024 and sell it today you would earn a total of 455.00 from holding Canadian Utilities Limited or generate 23.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.53% |
| Values | Daily Returns |
Diamondrock Hospitality Co vs. Canadian Utilities Limited
Performance |
| Timeline |
| Diamondrock Hospitality |
| Canadian Utilities |
Diamondrock Hospitality and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Canadian Utilities
The main advantage of trading using opposite Diamondrock Hospitality and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Diamondrock Hospitality vs. PennantPark Investment | Diamondrock Hospitality vs. Evolution Mining Limited | Diamondrock Hospitality vs. New Residential Investment | Diamondrock Hospitality vs. KENNAMETAL INC |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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