Correlation Between Host Hotels and Mineral Financial

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

Diversification Opportunities for Host Hotels and Mineral Financial

0.2

Correlation Coefficient

Host Hotels  Mineral Financial

Modest diversification

The 3 months correlation between Host and Mineral is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Mineral Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Financial 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 Mineral Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Financial has no effect on the direction of Host Hotels i.e., Host Hotels and Mineral Financial go up and down completely randomly.

Pair Corralation between Host Hotels and Mineral Financial

Assuming the 90 days trading horizon Host Hotels Resorts is expected to under-perform the Mineral Financial. But the stock apears to be less risky and, when comparing its historical volatility, Host Hotels Resorts is 1.94 times less risky than Mineral Financial. The stock trades about -0.2 of its potential returns per unit of risk. The Mineral Financial Investments is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Mineral Financial Investments on October 9, 2024 and sell it today you would earn a total of  75.00  from holding Mineral Financial Investments or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Host Hotels Resorts  vs.  Mineral Financial Investments

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.

Mineral Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mineral Financial Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mineral Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Host Hotels and Mineral Financial

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

The idea behind Host Hotels Resorts and Mineral Financial Investments 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 Global Correlations module to find global opportunities by holding instruments from different markets.