Correlation Between Host Hotels and Tyson Foods

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

Diversification Opportunities for Host Hotels and Tyson Foods

0.74

Correlation Coefficient

Host Hotels  Tyson Foods

Poor diversification

The 3 months correlation between Host and Tyson is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods 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 Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of Host Hotels i.e., Host Hotels and Tyson Foods go up and down completely randomly.

Pair Corralation between Host Hotels and Tyson Foods

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 1.72 times more return on investment than Tyson Foods. However, Host Hotels is 1.72 times more volatile than Tyson Foods. It trades about -0.06 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.51 per unit of risk. If you would invest  1,740  in Host Hotels Resorts on October 5, 2024 and sell it today you would lose (40.00) from holding Host Hotels Resorts or give up 2.3% of portfolio value over 90 days.

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

Host Hotels Resorts  vs.  Tyson Foods

Host Hotels Resorts

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Host Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tyson Foods

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tyson Foods 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 Tyson Foods

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

The idea behind Host Hotels Resorts and Tyson Foods 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..