Correlation Between Host Hotels and FC Investment

Can any of the company-specific risk be diversified away by investing in both Host Hotels and FC Investment 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 FC Investment 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 FC Investment Trust, you can compare the effects of market volatilities on Host Hotels and FC Investment 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 FC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and FC Investment.

Diversification Opportunities for Host Hotels and FC Investment

0.51

Correlation Coefficient

Host Hotels  FC Investment

Very weak diversification

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

Pair Corralation between Host Hotels and FC Investment

Assuming the 90 days trading horizon Host Hotels is expected to generate 1.7 times less return on investment than FC Investment. In addition to that, Host Hotels is 2.02 times more volatile than FC Investment Trust. It trades about 0.06 of its total potential returns per unit of risk. FC Investment Trust is currently generating about 0.2 per unit of volatility. If you would invest  102,641  in FC Investment Trust on August 31, 2024 and sell it today you would earn a total of  9,759  from holding FC Investment Trust or generate 9.51% return on investment over 90 days.

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

Host Hotels Resorts  vs.  FC Investment Trust

Host Hotels Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

FC Investment Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Host Hotels and FC Investment

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

The idea behind Host Hotels Resorts and FC Investment Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.