Correlation Between Diamondrock Hospitality and Umicore SA
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality and Umicore SA 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 Umicore SA 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 Umicore SA, you can compare the effects of market volatilities on Diamondrock Hospitality and Umicore SA 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 Umicore SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Umicore SA.
Diversification Opportunities for Diamondrock Hospitality and Umicore SA
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Diamondrock and Umicore is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality Co and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA 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 Umicore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umicore SA has no effect on the direction of Diamondrock Hospitality i.e., Diamondrock Hospitality and Umicore SA go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Umicore SA
Assuming the 90 days trading horizon Diamondrock Hospitality Co is expected to generate 1.1 times more return on investment than Umicore SA. However, Diamondrock Hospitality is 1.1 times more volatile than Umicore SA. It trades about 0.2 of its potential returns per unit of risk. Umicore SA is currently generating about -0.27 per unit of risk. If you would invest 790.00 in Diamondrock Hospitality Co on September 3, 2024 and sell it today you would earn a total of 75.00 from holding Diamondrock Hospitality Co or generate 9.49% 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. Umicore SA
Performance |
| Timeline |
| Diamondrock Hospitality |
| Umicore SA |
Diamondrock Hospitality and Umicore SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Umicore SA
The main advantage of trading using opposite Diamondrock Hospitality and Umicore SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality position performs unexpectedly, Umicore SA 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 Umicore SA will offset losses from the drop in Umicore SA's long position.| Diamondrock Hospitality vs. Apple Inc | Diamondrock Hospitality vs. Apple Inc | Diamondrock Hospitality vs. Apple Inc | Diamondrock Hospitality vs. Apple 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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