Correlation Between Host Hotels and Supermarket Income

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

Diversification Opportunities for Host Hotels and Supermarket Income

-0.16

Correlation Coefficient

Host Hotels  Supermarket Income

Good diversification

The 3 months correlation between Host and Supermarket is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Supermarket Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermarket Income REIT 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 Supermarket Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermarket Income REIT has no effect on the direction of Host Hotels i.e., Host Hotels and Supermarket Income go up and down completely randomly.

Pair Corralation between Host Hotels and Supermarket Income

Assuming the 90 days trading horizon Host Hotels Resorts is expected to under-perform the Supermarket Income. In addition to that, Host Hotels is 1.54 times more volatile than Supermarket Income REIT. It trades about -0.21 of its total potential returns per unit of risk. Supermarket Income REIT is currently generating about -0.11 per unit of volatility. If you would invest  7,030  in Supermarket Income REIT on October 8, 2024 and sell it today you would lose (150.00) from holding Supermarket Income REIT or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Host Hotels Resorts  vs.  Supermarket Income REIT

Host Hotels Resorts

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Host Hotels and Supermarket Income

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

The idea behind Host Hotels Resorts and Supermarket Income REIT 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.