Correlation Between Host Hotels and Qingling Motors

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

Diversification Opportunities for Host Hotels and Qingling Motors

0.31

Correlation Coefficient

Host Hotels  Qingling Motors

Weak diversification

The 3 months correlation between Host and Qingling is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Qingling Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingling Motors 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 Qingling Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingling Motors has no effect on the direction of Host Hotels i.e., Host Hotels and Qingling Motors go up and down completely randomly.

Pair Corralation between Host Hotels and Qingling Motors

Assuming the 90 days horizon Host Hotels is expected to generate 1.43 times less return on investment than Qingling Motors. But when comparing it to its historical volatility, Host Hotels Resorts is 1.72 times less risky than Qingling Motors. It trades about 0.03 of its potential returns per unit of risk. Qingling Motors Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6.14  in Qingling Motors Co on October 7, 2024 and sell it today you would earn a total of  0.16  from holding Qingling Motors Co or generate 2.61% 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.  Qingling Motors Co

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

Qingling Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qingling Motors Co 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Host Hotels and Qingling Motors

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

The idea behind Host Hotels Resorts and Qingling Motors Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.