Correlation Between Host Hotels and FORTEC Elektronik

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

Diversification Opportunities for Host Hotels and FORTEC Elektronik

0.21

Correlation Coefficient

Host Hotels  FORTEC Elektronik

Modest diversification

The 3 months correlation between Host and FORTEC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and FORTEC Elektronik AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTEC Elektronik 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 FORTEC Elektronik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTEC Elektronik has no effect on the direction of Host Hotels i.e., Host Hotels and FORTEC Elektronik go up and down completely randomly.

Pair Corralation between Host Hotels and FORTEC Elektronik

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.81 times more return on investment than FORTEC Elektronik. However, Host Hotels Resorts is 1.24 times less risky than FORTEC Elektronik. It trades about 0.06 of its potential returns per unit of risk. FORTEC Elektronik AG is currently generating about 0.03 per unit of risk. If you would invest  1,561  in Host Hotels Resorts on October 9, 2024 and sell it today you would earn a total of  89.00  from holding Host Hotels Resorts or generate 5.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Host Hotels Resorts  vs.  FORTEC Elektronik AG

Host Hotels Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FORTEC Elektronik

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FORTEC Elektronik AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FORTEC Elektronik is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Host Hotels and FORTEC Elektronik

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

The idea behind Host Hotels Resorts and FORTEC Elektronik AG 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.