Correlation Between Host Hotels and LBG Media

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

Diversification Opportunities for Host Hotels and LBG Media

-0.59

Correlation Coefficient

Host Hotels  LBG Media

Excellent diversification

The 3 months correlation between Host and LBG is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of Host Hotels i.e., Host Hotels and LBG Media go up and down completely randomly.

Pair Corralation between Host Hotels and LBG Media

Assuming the 90 days trading horizon Host Hotels Resorts is expected to generate 0.56 times more return on investment than LBG Media. However, Host Hotels Resorts is 1.78 times less risky than LBG Media. It trades about 0.24 of its potential returns per unit of risk. LBG Media PLC is currently generating about -0.03 per unit of risk. If you would invest  1,720  in Host Hotels Resorts on September 20, 2024 and sell it today you would earn a total of  126.00  from holding Host Hotels Resorts or generate 7.33% return on investment over 90 days.

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

Host Hotels Resorts  vs.  LBG Media PLC

Host Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Host Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LBG Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Host Hotels and LBG Media

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

The idea behind Host Hotels Resorts and LBG Media 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.