Correlation Between Host Hotels and FLOW TRADERS

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

Diversification Opportunities for Host Hotels and FLOW TRADERS

0.37

Correlation Coefficient

Host Hotels  FLOW TRADERS

Weak diversification

The 3 months correlation between Host and FLOW is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD 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 FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of Host Hotels i.e., Host Hotels and FLOW TRADERS go up and down completely randomly.

Pair Corralation between Host Hotels and FLOW TRADERS

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.86 times more return on investment than FLOW TRADERS. However, Host Hotels Resorts is 1.16 times less risky than FLOW TRADERS. It trades about 0.02 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.01 per unit of risk. If you would invest  1,441  in Host Hotels Resorts on October 11, 2024 and sell it today you would earn a total of  199.00  from holding Host Hotels Resorts or generate 13.81% return on investment over 90 days.

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

Host Hotels Resorts  vs.  FLOW TRADERS LTD

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.

FLOW TRADERS LTD

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FLOW TRADERS 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 FLOW TRADERS

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

The idea behind Host Hotels Resorts and FLOW TRADERS LTD 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.