Correlation Between Host Hotels and Toyota

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

Diversification Opportunities for Host Hotels and Toyota

0.52

Correlation Coefficient

Host Hotels  Toyota

Very weak diversification

The 3 months correlation between Host and Toyota is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of Host Hotels i.e., Host Hotels and Toyota go up and down completely randomly.

Pair Corralation between Host Hotels and Toyota

Assuming the 90 days trading horizon Host Hotels Resorts is expected to under-perform the Toyota. But the stock apears to be less risky and, when comparing its historical volatility, Host Hotels Resorts is 1.52 times less risky than Toyota. The stock trades about -0.22 of its potential returns per unit of risk. The Toyota Motor Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  308,998  in Toyota Motor Corp on December 30, 2024 and sell it today you would lose (33,198) from holding Toyota Motor Corp or give up 10.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Host Hotels Resorts  vs.  Toyota Motor Corp

Host Hotels Resorts

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Toyota Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor Corp 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 Toyota

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

The idea behind Host Hotels Resorts and Toyota Motor Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.