Correlation Between Grande Hospitality and S Hotels

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

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

Diversification Opportunities for Grande Hospitality and S Hotels

0.5

Correlation Coefficient

Grande Hospitality  S Hotels

Very weak diversification

The 3 months correlation between Grande and SHR is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Grande Hospitality Real and S Hotels and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S Hotels and Grande Hospitality 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 Grande Hospitality Real are associated (or correlated) with S Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S Hotels has no effect on the direction of Grande Hospitality i.e., Grande Hospitality and S Hotels go up and down completely randomly.

Pair Corralation between Grande Hospitality and S Hotels

Assuming the 90 days trading horizon Grande Hospitality is expected to generate 5.98 times less return on investment than S Hotels. But when comparing it to its historical volatility, Grande Hospitality Real is 2.03 times less risky than S Hotels. It trades about 0.02 of its potential returns per unit of risk. S Hotels and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  230.00  in S Hotels and on September 14, 2024 and sell it today you would earn a total of  12.00  from holding S Hotels and or generate 5.22% return on investment over 90 days.

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

Grande Hospitality Real  vs.  S Hotels and

Grande Hospitality Real

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grande Hospitality Real are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grande Hospitality is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

S Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S Hotels and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, S Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grande Hospitality and S Hotels

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

The idea behind Grande Hospitality Real and S Hotels and 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.