Correlation Between New Residential and Host Hotels

Can any of the company-specific risk be diversified away by investing in both New Residential and Host Hotels 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 New Residential and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Residential Investment and Host Hotels Resorts, you can compare the effects of market volatilities on New Residential and Host Hotels 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 New Residential with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Host Hotels.

Diversification Opportunities for New Residential and Host Hotels

0.82

Correlation Coefficient

New Residential  Host Hotels

Very poor diversification

The 3 months correlation between New and Host is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts and New Residential 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 New Residential Investment are associated (or correlated) with Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of New Residential i.e., New Residential and Host Hotels go up and down completely randomly.

Pair Corralation between New Residential and Host Hotels

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.65 times more return on investment than Host Hotels. However, New Residential Investment is 1.54 times less risky than Host Hotels. It trades about 0.29 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about -0.03 per unit of risk. If you would invest  957.00  in New Residential Investment on October 7, 2024 and sell it today you would earn a total of  123.00  from holding New Residential Investment or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

New Residential Investment  vs.  Host Hotels Resorts

New Residential Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

Host Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Host Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with New Residential and Host Hotels

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

The idea behind New Residential Investment and Host Hotels Resorts 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.