Correlation Between Host Hotels and Gaming Realms

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

Diversification Opportunities for Host Hotels and Gaming Realms

-0.03

Correlation Coefficient

Host Hotels  Gaming Realms

Good diversification

The 3 months correlation between Host and Gaming is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Gaming Realms plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Realms plc 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 Gaming Realms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Realms plc has no effect on the direction of Host Hotels i.e., Host Hotels and Gaming Realms go up and down completely randomly.

Pair Corralation between Host Hotels and Gaming Realms

Assuming the 90 days trading horizon Host Hotels is expected to generate 2.43 times less return on investment than Gaming Realms. But when comparing it to its historical volatility, Host Hotels Resorts is 2.29 times less risky than Gaming Realms. It trades about 0.14 of its potential returns per unit of risk. Gaming Realms plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,310  in Gaming Realms plc on August 30, 2024 and sell it today you would earn a total of  380.00  from holding Gaming Realms plc or generate 11.48% return on investment over 90 days.

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

Host Hotels Resorts  vs.  Gaming Realms plc

Host Hotels Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 5 (%) 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.

Gaming Realms plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming Realms plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Gaming Realms is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Host Hotels and Gaming Realms

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

The idea behind Host Hotels Resorts and Gaming Realms plc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.