Correlation Between Xunlei and HOSPITALITY

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Can any of the company-specific risk be diversified away by investing in both Xunlei and 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 Xunlei and HOSPITALITY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xunlei Ltd Adr and HOSPITALITY PPTYS TR, you can compare the effects of market volatilities on Xunlei and 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 Xunlei with a short position of HOSPITALITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xunlei and HOSPITALITY.

Diversification Opportunities for Xunlei and HOSPITALITY

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Xunlei and HOSPITALITY is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr and HOSPITALITY PPTYS TR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOSPITALITY PPTYS and Xunlei 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 Xunlei Ltd Adr are associated (or correlated) with HOSPITALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOSPITALITY PPTYS has no effect on the direction of Xunlei i.e., Xunlei and HOSPITALITY go up and down completely randomly.

Pair Corralation between Xunlei and HOSPITALITY

Given the investment horizon of 90 days Xunlei Ltd Adr is expected to generate 4.29 times more return on investment than HOSPITALITY. However, Xunlei is 4.29 times more volatile than HOSPITALITY PPTYS TR. It trades about -0.02 of its potential returns per unit of risk. HOSPITALITY PPTYS TR is currently generating about -0.13 per unit of risk. If you would invest  220.00  in Xunlei Ltd Adr on September 12, 2024 and sell it today you would lose (8.00) from holding Xunlei Ltd Adr or give up 3.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Xunlei Ltd Adr  vs.  HOSPITALITY PPTYS TR

 Performance 
       Timeline  
Xunlei Ltd Adr 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.
HOSPITALITY PPTYS 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in HOSPITALITY PPTYS TR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HOSPITALITY is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Xunlei and HOSPITALITY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xunlei and HOSPITALITY

The main advantage of trading using opposite Xunlei and HOSPITALITY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xunlei position performs unexpectedly, 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 HOSPITALITY will offset losses from the drop in HOSPITALITY's long position.
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The idea behind Xunlei Ltd Adr and HOSPITALITY PPTYS TR 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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