Correlation Between Xenia Hotels and Rollins

Can any of the company-specific risk be diversified away by investing in both Xenia Hotels and Rollins 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 Xenia Hotels and Rollins into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xenia Hotels Resorts and Rollins, you can compare the effects of market volatilities on Xenia Hotels and Rollins 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 Xenia Hotels with a short position of Rollins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xenia Hotels and Rollins.

Diversification Opportunities for Xenia Hotels and Rollins

0.63

Correlation Coefficient

Xenia Hotels  Rollins

Poor diversification

The 3 months correlation between Xenia and Rollins is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts and Rollins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rollins and Xenia Hotels 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 Xenia Hotels Resorts are associated (or correlated) with Rollins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rollins has no effect on the direction of Xenia Hotels i.e., Xenia Hotels and Rollins go up and down completely randomly.

Pair Corralation between Xenia Hotels and Rollins

Assuming the 90 days trading horizon Xenia Hotels Resorts is expected to generate 1.24 times more return on investment than Rollins. However, Xenia Hotels is 1.24 times more volatile than Rollins. It trades about 0.11 of its potential returns per unit of risk. Rollins is currently generating about 0.04 per unit of risk. If you would invest  1,328  in Xenia Hotels Resorts on September 20, 2024 and sell it today you would earn a total of  182.00  from holding Xenia Hotels Resorts or generate 13.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Xenia Hotels Resorts  vs.  Rollins

Xenia Hotels Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Xenia Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Rollins

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rollins are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rollins is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xenia Hotels and Rollins

The main advantage of trading using opposite Xenia Hotels and Rollins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xenia Hotels position performs unexpectedly, Rollins 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 Rollins will offset losses from the drop in Rollins' long position.

The idea behind Xenia Hotels Resorts and Rollins 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.