Correlation Between Chatham Lodging and Host Hotels

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

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

Diversification Opportunities for Chatham Lodging and Host Hotels

0.85

Correlation Coefficient

Chatham Lodging  Host Hotels

Very poor diversification

The 3 months correlation between Chatham and Host is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Lodging Trust 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 Chatham Lodging 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 Chatham Lodging Trust 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 Chatham Lodging i.e., Chatham Lodging and Host Hotels go up and down completely randomly.

Pair Corralation between Chatham Lodging and Host Hotels

Given the investment horizon of 90 days Chatham Lodging Trust is expected to generate 1.72 times more return on investment than Host Hotels. However, Chatham Lodging is 1.72 times more volatile than Host Hotels Resorts. It trades about 0.13 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.1 per unit of risk. If you would invest  825.00  in Chatham Lodging Trust on September 16, 2024 and sell it today you would earn a total of  142.00  from holding Chatham Lodging Trust or generate 17.21% return on investment over 90 days.

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

Chatham Lodging Trust  vs.  Host Hotels Resorts

Chatham Lodging Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chatham Lodging Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Chatham Lodging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Host Hotels Resorts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chatham Lodging and Host Hotels

The main advantage of trading using opposite Chatham Lodging and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chatham Lodging 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 Chatham Lodging Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.