Correlation Between Host Hotels and Investment

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

Diversification Opportunities for Host Hotels and Investment

0.51

Correlation Coefficient

Host Hotels  Investment

Very weak diversification

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

Pair Corralation between Host Hotels and Investment

Assuming the 90 days trading horizon Host Hotels Resorts is expected to generate 2.6 times more return on investment than Investment. However, Host Hotels is 2.6 times more volatile than The Investment. It trades about 0.09 of its potential returns per unit of risk. The Investment is currently generating about 0.08 per unit of risk. If you would invest  1,717  in Host Hotels Resorts on September 3, 2024 and sell it today you would earn a total of  135.00  from holding Host Hotels Resorts or generate 7.86% 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.  The Investment

Host Hotels Resorts

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Host Hotels and Investment

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

The idea behind Host Hotels Resorts and The Investment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.