Correlation Between Host Hotels and Yamaha

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

Diversification Opportunities for Host Hotels and Yamaha

0.56

Correlation Coefficient

Host Hotels  Yamaha

Very weak diversification

The 3 months correlation between Host and Yamaha is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Yamaha Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha Motor 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Motor has no effect on the direction of Host Hotels i.e., Host Hotels and Yamaha go up and down completely randomly.

Pair Corralation between Host Hotels and Yamaha

Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.83 times more return on investment than Yamaha. However, Host Hotels Resorts is 1.2 times less risky than Yamaha. It trades about -0.25 of its potential returns per unit of risk. Yamaha Motor Co is currently generating about -0.35 per unit of risk. If you would invest  1,720  in Host Hotels Resorts on October 26, 2024 and sell it today you would lose (80.00) from holding Host Hotels Resorts or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Host Hotels Resorts  vs.  Yamaha Motor Co

Host Hotels Resorts

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 2 (%) 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.

Yamaha Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Host Hotels Resorts and Yamaha Motor 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.