Correlation Between BW OFFSHORE and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both BW OFFSHORE 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 BW OFFSHORE and DiamondRock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW OFFSHORE LTD and DiamondRock Hospitality, you can compare the effects of market volatilities on BW OFFSHORE 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 BW OFFSHORE with a short position of DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW OFFSHORE and DiamondRock Hospitality.
Diversification Opportunities for BW OFFSHORE and DiamondRock Hospitality
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between XY81 and DiamondRock is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality and BW OFFSHORE 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 BW OFFSHORE LTD 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 BW OFFSHORE i.e., BW OFFSHORE and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between BW OFFSHORE and DiamondRock Hospitality
Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to under-perform the DiamondRock Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, BW OFFSHORE LTD is 2.42 times less risky than DiamondRock Hospitality. The stock trades about -0.13 of its potential returns per unit of risk. The DiamondRock Hospitality is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 805.00 in DiamondRock Hospitality on August 24, 2024 and sell it today you would earn a total of 60.00 from holding DiamondRock Hospitality or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BW OFFSHORE LTD vs. DiamondRock Hospitality
Performance |
| Timeline |
| BW OFFSHORE LTD |
| DiamondRock Hospitality |
BW OFFSHORE and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW OFFSHORE and DiamondRock Hospitality
The main advantage of trading using opposite BW OFFSHORE and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW OFFSHORE 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.| BW OFFSHORE vs. Halliburton | BW OFFSHORE vs. Halliburton | BW OFFSHORE vs. Baker Hughes Co | BW OFFSHORE vs. Tenaris SA |
| DiamondRock Hospitality vs. FOUR NERS PROPERTY | DiamondRock Hospitality vs. BRAEMAR HOTELS RES | DiamondRock Hospitality vs. Sotherly Hotels |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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