Correlation Between Host Hotels and Alibaba Health

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

Diversification Opportunities for Host Hotels and Alibaba Health

-0.11

Correlation Coefficient

Host Hotels  Alibaba Health

Good diversification

The 3 months correlation between Host and Alibaba is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor 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 Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Host Hotels i.e., Host Hotels and Alibaba Health go up and down completely randomly.

Pair Corralation between Host Hotels and Alibaba Health

Assuming the 90 days horizon Host Hotels Resorts is expected to under-perform the Alibaba Health. But the stock apears to be less risky and, when comparing its historical volatility, Host Hotels Resorts is 2.27 times less risky than Alibaba Health. The stock trades about -0.35 of its potential returns per unit of risk. The Alibaba Health Information is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Alibaba Health Information on October 25, 2024 and sell it today you would lose (2.00) from holding Alibaba Health Information or give up 4.76% of portfolio value over 90 days.

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

Host Hotels Resorts  vs.  Alibaba Health Information

Host Hotels Resorts

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 1 (%) 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.

Alibaba Health Infor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alibaba Health Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Host Hotels and Alibaba Health

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

The idea behind Host Hotels Resorts and Alibaba Health Information 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.