Correlation Between Diamondrock Hospitality and Natural Health
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality and Natural Health 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 Natural Health 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 Natural Health Trends, you can compare the effects of market volatilities on Diamondrock Hospitality and Natural Health 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 Natural Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Natural Health.
Diversification Opportunities for Diamondrock Hospitality and Natural Health
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diamondrock and Natural is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality Co and Natural Health Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Health Trends 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 Natural Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Health Trends has no effect on the direction of Diamondrock Hospitality i.e., Diamondrock Hospitality and Natural Health go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Natural Health
Assuming the 90 days trading horizon Diamondrock Hospitality Co is expected to generate 0.74 times more return on investment than Natural Health. However, Diamondrock Hospitality Co is 1.35 times less risky than Natural Health. It trades about 0.11 of its potential returns per unit of risk. Natural Health Trends is currently generating about 0.06 per unit of risk. If you would invest 792.00 in Diamondrock Hospitality Co on August 28, 2024 and sell it today you would earn a total of 68.00 from holding Diamondrock Hospitality Co or generate 8.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamondrock Hospitality Co vs. Natural Health Trends
Performance |
| Timeline |
| Diamondrock Hospitality |
| Natural Health Trends |
Diamondrock Hospitality and Natural Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Natural Health
The main advantage of trading using opposite Diamondrock Hospitality and Natural Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality position performs unexpectedly, Natural Health 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 Natural Health will offset losses from the drop in Natural Health's long position.| Diamondrock Hospitality vs. Apple Inc | Diamondrock Hospitality vs. Apple Inc | Diamondrock Hospitality vs. Apple Inc | Diamondrock Hospitality vs. Apple Inc |
| Natural Health vs. COMBA TELECOM SYST | Natural Health vs. EAGLE MATERIALS | Natural Health vs. Cogent Communications Holdings | Natural Health vs. SK TELECOM TDADR |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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