Correlation Between Host Hotels and State Street

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

Diversification Opportunities for Host Hotels and State Street

0.86

Correlation Coefficient

Host Hotels  State Street

Very poor diversification

The 3 months correlation between Host and State is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Host Hotels i.e., Host Hotels and State Street go up and down completely randomly.

Pair Corralation between Host Hotels and State Street

Assuming the 90 days horizon Host Hotels is expected to generate 3.32 times less return on investment than State Street. In addition to that, Host Hotels is 1.4 times more volatile than State Street. It trades about 0.05 of its total potential returns per unit of risk. State Street is currently generating about 0.24 per unit of volatility. If you would invest  7,872  in State Street on October 6, 2024 and sell it today you would earn a total of  1,646  from holding State Street or generate 20.91% return on investment over 90 days.

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

Host Hotels Resorts  vs.  State Street

Host Hotels Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 4 (%) 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.

State Street

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Host Hotels and State Street

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

The idea behind Host Hotels Resorts and State Street 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.