Correlation Between Host Hotels and PT Hexindo

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

Diversification Opportunities for Host Hotels and PT Hexindo

-0.63

Correlation Coefficient

Host Hotels  PT Hexindo

Excellent diversification

The 3 months correlation between Host and HX1A is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and PT Hexindo Adiperkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Hexindo Adiperkasa 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 PT Hexindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Hexindo Adiperkasa has no effect on the direction of Host Hotels i.e., Host Hotels and PT Hexindo go up and down completely randomly.

Pair Corralation between Host Hotels and PT Hexindo

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.5 times more return on investment than PT Hexindo. However, Host Hotels Resorts is 1.99 times less risky than PT Hexindo. It trades about 0.02 of its potential returns per unit of risk. PT Hexindo Adiperkasa is currently generating about -0.03 per unit of risk. If you would invest  1,720  in Host Hotels Resorts on September 26, 2024 and sell it today you would earn a total of  10.00  from holding Host Hotels Resorts or generate 0.58% return on investment over 90 days.

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

Host Hotels Resorts  vs.  PT Hexindo Adiperkasa

Host Hotels Resorts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 6 (%) 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 January 2025.

PT Hexindo Adiperkasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Hexindo Adiperkasa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Host Hotels and PT Hexindo

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

The idea behind Host Hotels Resorts and PT Hexindo Adiperkasa 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.