Correlation Between Host Hotels and Cars
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Cars 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 Host Hotels and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Host Hotels Resorts and Cars Inc, you can compare the effects of market volatilities on Host Hotels and Cars 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 Host Hotels with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Cars.
Diversification Opportunities for Host Hotels and Cars
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Host and Cars is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Host 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 Host Hotels Resorts are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Host Hotels i.e., Host Hotels and Cars go up and down completely randomly.
Pair Corralation between Host Hotels and Cars
Assuming the 90 days trading horizon Host Hotels is expected to generate 1.24 times less return on investment than Cars. But when comparing it to its historical volatility, Host Hotels Resorts is 2.1 times less risky than Cars. It trades about 0.11 of its potential returns per unit of risk. Cars Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,778 in Cars Inc on September 14, 2024 and sell it today you would earn a total of 104.00 from holding Cars Inc or generate 5.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 62.5% |
Values | Daily Returns |
Host Hotels Resorts vs. Cars Inc
Performance |
Timeline |
Host Hotels Resorts |
Cars Inc |
Host Hotels and Cars Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Host Hotels and Cars
The main advantage of trading using opposite Host Hotels and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.Host Hotels vs. iShares Physical Silver | Host Hotels vs. Zoom Video Communications | Host Hotels vs. Endeavour Mining Corp | Host Hotels vs. GoldMining |
Cars vs. Southern Copper Corp | Cars vs. Nordic Semiconductor ASA | Cars vs. Elmos Semiconductor SE | Cars vs. Samsung Electronics Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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