Correlation Between Star Diamond and APPLE HOSPITALITY

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

By analyzing existing cross correlation between Star Diamond and APPLE HOSPITALITY REIT, you can compare the effects of market volatilities on Star Diamond and APPLE 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 Star Diamond with a short position of APPLE HOSPITALITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Diamond and APPLE HOSPITALITY.

Diversification Opportunities for Star Diamond and APPLE HOSPITALITY

-0.51

Correlation Coefficient

Star Diamond  APPLE HOSPITALITY

Excellent diversification

The 3 months correlation between Star and APPLE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Star Diamond and APPLE HOSPITALITY REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLE HOSPITALITY REIT and Star Diamond 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 Star Diamond are associated (or correlated) with APPLE HOSPITALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLE HOSPITALITY REIT has no effect on the direction of Star Diamond i.e., Star Diamond and APPLE HOSPITALITY go up and down completely randomly.

Pair Corralation between Star Diamond and APPLE HOSPITALITY

Assuming the 90 days horizon Star Diamond is expected to generate 11.13 times more return on investment than APPLE HOSPITALITY. However, Star Diamond is 11.13 times more volatile than APPLE HOSPITALITY REIT. It trades about 0.1 of its potential returns per unit of risk. APPLE HOSPITALITY REIT is currently generating about 0.18 per unit of risk. If you would invest  2.35  in Star Diamond on September 4, 2024 and sell it today you would earn a total of  0.15  from holding Star Diamond or generate 6.38% return on investment over 90 days.

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

Star Diamond  vs.  APPLE HOSPITALITY REIT

Star Diamond

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Diamond are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Star Diamond reported solid returns over the last few months and may actually be approaching a breakup point.

APPLE HOSPITALITY REIT

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in APPLE HOSPITALITY REIT are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, APPLE HOSPITALITY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Star Diamond and APPLE HOSPITALITY

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

The idea behind Star Diamond and APPLE HOSPITALITY REIT 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.