Correlation Between WILLIS LEASE and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE and DiamondRock Hospitality 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 WILLIS LEASE and DiamondRock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WILLIS LEASE FIN and DiamondRock Hospitality, you can compare the effects of market volatilities on WILLIS LEASE and DiamondRock Hospitality 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 WILLIS LEASE with a short position of DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and DiamondRock Hospitality.
Diversification Opportunities for WILLIS LEASE and DiamondRock Hospitality
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WILLIS and DiamondRock is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between WILLIS LEASE and DiamondRock Hospitality
Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 2.89 times more return on investment than DiamondRock Hospitality. However, WILLIS LEASE is 2.89 times more volatile than DiamondRock Hospitality. It trades about 0.15 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.23 per unit of risk. If you would invest 17,180 in WILLIS LEASE FIN on September 5, 2024 and sell it today you would earn a total of 3,020 from holding WILLIS LEASE FIN or generate 17.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WILLIS LEASE FIN vs. DiamondRock Hospitality
Performance |
| Timeline |
| WILLIS LEASE FIN |
| DiamondRock Hospitality |
WILLIS LEASE and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WILLIS LEASE and DiamondRock Hospitality
The main advantage of trading using opposite WILLIS LEASE and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE position performs unexpectedly, DiamondRock Hospitality 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 DiamondRock Hospitality will offset losses from the drop in DiamondRock Hospitality's long position.| WILLIS LEASE vs. DiamondRock Hospitality | WILLIS LEASE vs. SHIP HEALTHCARE HLDGINC | WILLIS LEASE vs. CVS Health | WILLIS LEASE vs. Sunny Optical Technology |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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