Correlation Between Host Hotels and Salesforce

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

Diversification Opportunities for Host Hotels and Salesforce

0.88

Correlation Coefficient

Host Hotels  Salesforce

Very poor diversification

The 3 months correlation between Host and Salesforce is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Host Hotels i.e., Host Hotels and Salesforce go up and down completely randomly.

Pair Corralation between Host Hotels and Salesforce

Assuming the 90 days horizon Host Hotels Resorts is expected to under-perform the Salesforce. In addition to that, Host Hotels is 1.62 times more volatile than Salesforce. It trades about -0.22 of its total potential returns per unit of risk. Salesforce is currently generating about -0.32 per unit of volatility. If you would invest  33,480  in Salesforce on October 11, 2024 and sell it today you would lose (1,895) from holding Salesforce or give up 5.66% of portfolio value over 90 days.

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

Host Hotels Resorts  vs.  Salesforce

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Salesforce

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Host Hotels and Salesforce

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

The idea behind Host Hotels Resorts and Salesforce 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.