Correlation Between Chatham Lodging and Ryman Hospitality

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

By analyzing existing cross correlation between Chatham Lodging Trust and Ryman Hospitality Properties, you can compare the effects of market volatilities on Chatham Lodging and Ryman 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 Chatham Lodging with a short position of Ryman Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chatham Lodging and Ryman Hospitality.

Diversification Opportunities for Chatham Lodging and Ryman Hospitality

0.69

Correlation Coefficient

Chatham Lodging  Ryman Hospitality

Poor diversification

The 3 months correlation between Chatham and Ryman is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Lodging Trust and Ryman Hospitality Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryman Hospitality and Chatham Lodging 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 Chatham Lodging Trust are associated (or correlated) with Ryman Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryman Hospitality has no effect on the direction of Chatham Lodging i.e., Chatham Lodging and Ryman Hospitality go up and down completely randomly.

Pair Corralation between Chatham Lodging and Ryman Hospitality

Given the investment horizon of 90 days Chatham Lodging Trust is expected to generate 2.08 times more return on investment than Ryman Hospitality. However, Chatham Lodging is 2.08 times more volatile than Ryman Hospitality Properties. It trades about 0.29 of its potential returns per unit of risk. Ryman Hospitality Properties is currently generating about 0.33 per unit of risk. If you would invest  786.00  in Chatham Lodging Trust on September 2, 2024 and sell it today you would earn a total of  135.00  from holding Chatham Lodging Trust or generate 17.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Chatham Lodging Trust  vs.  Ryman Hospitality Properties

Chatham Lodging Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Lodging Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Chatham Lodging may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ryman Hospitality

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryman Hospitality Properties are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical indicators, Ryman Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chatham Lodging and Ryman Hospitality

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

The idea behind Chatham Lodging Trust and Ryman Hospitality Properties 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.