Correlation Between GreenTree Hospitality and Soho House

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

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

Diversification Opportunities for GreenTree Hospitality and Soho House

0.31

Correlation Coefficient

GreenTree Hospitality  Soho House

Weak diversification

The 3 months correlation between GreenTree and Soho is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding GreenTree Hospitality Group and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House and GreenTree 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 GreenTree Hospitality Group are associated (or correlated) with Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of GreenTree Hospitality i.e., GreenTree Hospitality and Soho House go up and down completely randomly.

Pair Corralation between GreenTree Hospitality and Soho House

Considering the 90-day investment horizon GreenTree Hospitality Group is expected to under-perform the Soho House. But the stock apears to be less risky and, when comparing its historical volatility, GreenTree Hospitality Group is 1.56 times less risky than Soho House. The stock trades about -0.13 of its potential returns per unit of risk. The Soho House Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  613.00  in Soho House Co on March 5, 2024 and sell it today you would lose (101.00) from holding Soho House Co or give up 16.48% of portfolio value over 90 days.

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

GreenTree Hospitality Group  vs.  Soho House Co

GreenTree Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenTree Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Soho House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soho House Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with GreenTree Hospitality and Soho House

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

The idea behind GreenTree Hospitality Group and Soho House 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.