Correlation Between Host Hotels and ENTAIN PLC

Can any of the company-specific risk be diversified away by investing in both Host Hotels and ENTAIN PLC 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 ENTAIN PLC 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 ENTAIN PLC UNSPADR1, you can compare the effects of market volatilities on Host Hotels and ENTAIN PLC 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 ENTAIN PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and ENTAIN PLC.

Diversification Opportunities for Host Hotels and ENTAIN PLC

0.52

Correlation Coefficient

Host Hotels  ENTAIN PLC

Very weak diversification

The 3 months correlation between Host and ENTAIN is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and ENTAIN PLC UNSPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTAIN PLC UNSPADR1 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 ENTAIN PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTAIN PLC UNSPADR1 has no effect on the direction of Host Hotels i.e., Host Hotels and ENTAIN PLC go up and down completely randomly.

Pair Corralation between Host Hotels and ENTAIN PLC

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.53 times more return on investment than ENTAIN PLC. However, Host Hotels Resorts is 1.88 times less risky than ENTAIN PLC. It trades about 0.03 of its potential returns per unit of risk. ENTAIN PLC UNSPADR1 is currently generating about -0.03 per unit of risk. If you would invest  1,434  in Host Hotels Resorts on October 24, 2024 and sell it today you would earn a total of  186.00  from holding Host Hotels Resorts or generate 12.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.76%
Values	Daily Returns

Host Hotels Resorts  vs.  ENTAIN PLC UNSPADR1

Host Hotels Resorts

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 2 (%) 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.

ENTAIN PLC UNSPADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENTAIN PLC UNSPADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, ENTAIN PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Host Hotels and ENTAIN PLC

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

The idea behind Host Hotels Resorts and ENTAIN PLC UNSPADR1 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.