Correlation Between Hyatt Hotels and Lowes Companies

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Can any of the company-specific risk be diversified away by investing in both Hyatt Hotels and Lowes Companies 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 Hyatt Hotels and Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyatt Hotels and Lowes Companies, you can compare the effects of market volatilities on Hyatt Hotels and Lowes Companies 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 Hyatt Hotels with a short position of Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyatt Hotels and Lowes Companies.

Diversification Opportunities for Hyatt Hotels and Lowes Companies

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Hyatt and Lowes is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hyatt Hotels and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Hyatt 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 Hyatt Hotels are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Hyatt Hotels i.e., Hyatt Hotels and Lowes Companies go up and down completely randomly.

Pair Corralation between Hyatt Hotels and Lowes Companies

Taking into account the 90-day investment horizon Hyatt Hotels is expected to generate 1.23 times less return on investment than Lowes Companies. But when comparing it to its historical volatility, Hyatt Hotels is 1.25 times less risky than Lowes Companies. It trades about 0.27 of its potential returns per unit of risk. Lowes Companies is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  23,539  in Lowes Companies on December 29, 2023 and sell it today you would earn a total of  1,794  from holding Lowes Companies or generate 7.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Hyatt Hotels  vs.  Lowes Companies

 Performance 
       Timeline  
Hyatt Hotels 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hyatt Hotels are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Hyatt Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Lowes Companies 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lowes Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Hyatt Hotels and Lowes Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hyatt Hotels and Lowes Companies

The main advantage of trading using opposite Hyatt Hotels and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyatt Hotels position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.
The idea behind Hyatt Hotels and Lowes Companies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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