Correlation Between Host Hotels and CAL MAINE

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

Diversification Opportunities for Host Hotels and CAL MAINE

0.77

Correlation Coefficient

Host Hotels  CAL MAINE

Poor diversification

The 3 months correlation between Host and CAL is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and CAL MAINE FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAL MAINE FOODS 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 CAL MAINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAL MAINE FOODS has no effect on the direction of Host Hotels i.e., Host Hotels and CAL MAINE go up and down completely randomly.

Pair Corralation between Host Hotels and CAL MAINE

Assuming the 90 days horizon Host Hotels is expected to generate 7.78 times less return on investment than CAL MAINE. But when comparing it to its historical volatility, Host Hotels Resorts is 1.14 times less risky than CAL MAINE. It trades about 0.04 of its potential returns per unit of risk. CAL MAINE FOODS is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  8,926  in CAL MAINE FOODS on September 22, 2024 and sell it today you would earn a total of  1,050  from holding CAL MAINE FOODS or generate 11.76% return on investment over 90 days.

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

Host Hotels Resorts  vs.  CAL MAINE FOODS

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. 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.

CAL MAINE FOODS

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Host Hotels and CAL MAINE

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

The idea behind Host Hotels Resorts and CAL MAINE FOODS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.