Correlation Between Host Hotels and First Quantum

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

Diversification Opportunities for Host Hotels and First Quantum

0.54

Correlation Coefficient

Host Hotels  First Quantum

Very weak diversification

The 3 months correlation between Host and First is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Host Hotels i.e., Host Hotels and First Quantum go up and down completely randomly.

Pair Corralation between Host Hotels and First Quantum

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.39 times more return on investment than First Quantum. However, Host Hotels Resorts is 2.56 times less risky than First Quantum. It trades about -0.19 of its potential returns per unit of risk. First Quantum Minerals is currently generating about -0.09 per unit of risk. If you would invest  1,610  in Host Hotels Resorts on December 11, 2024 and sell it today you would lose (180.00) from holding Host Hotels Resorts or give up 11.18% of portfolio value over 90 days.

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

Host Hotels Resorts  vs.  First Quantum Minerals

Host Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Host Hotels Resorts 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

First Quantum Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Quantum Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Host Hotels and First Quantum

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

The idea behind Host Hotels Resorts and First Quantum Minerals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.