Correlation Between Murata Manufacturing and Diamondrock Hospitality

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

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

Diversification Opportunities for Murata Manufacturing and Diamondrock Hospitality

-0.72

Correlation Coefficient

Murata Manufacturing  Diamondrock Hospitality

Pay attention - limited upside

The 3 months correlation between Murata and Diamondrock is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and Diamondrock Hospitality Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality and Murata Manufacturing 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 Murata Manufacturing Co 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 Murata Manufacturing i.e., Murata Manufacturing and Diamondrock Hospitality go up and down completely randomly.

Pair Corralation between Murata Manufacturing and Diamondrock Hospitality

Assuming the 90 days trading horizon Murata Manufacturing Co is expected to under-perform the Diamondrock Hospitality. In addition to that, Murata Manufacturing is 1.08 times more volatile than Diamondrock Hospitality Co. It trades about -0.1 of its total potential returns per unit of risk. Diamondrock Hospitality Co is currently generating about 0.13 per unit of volatility. If you would invest  757.00  in Diamondrock Hospitality Co on September 4, 2024 and sell it today you would earn a total of  113.00  from holding Diamondrock Hospitality Co or generate 14.93% return on investment over 90 days.

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

Murata Manufacturing Co  vs.  Diamondrock Hospitality Co

Murata Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murata Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Diamondrock Hospitality

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamondrock Hospitality Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diamondrock Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Murata Manufacturing and Diamondrock Hospitality

The main advantage of trading using opposite Murata Manufacturing and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murata Manufacturing 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.

The idea behind Murata Manufacturing Co and Diamondrock Hospitality Co 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.