Correlation Between HR Real and American Hotel

Can any of the company-specific risk be diversified away by investing in both HR Real and American Hotel 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 HR Real and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HR Real Estate and American Hotel Income, you can compare the effects of market volatilities on HR Real and American Hotel 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 HR Real with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of HR Real and American Hotel.

Diversification Opportunities for HR Real and American Hotel

-0.66

Correlation Coefficient

HR Real  American Hotel

Excellent diversification

The 3 months correlation between HR-UN and American is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding HR Real Estate and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and HR Real 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 HR Real Estate are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of HR Real i.e., HR Real and American Hotel go up and down completely randomly.

Pair Corralation between HR Real and American Hotel

Assuming the 90 days trading horizon HR Real Estate is expected to generate 0.4 times more return on investment than American Hotel. However, HR Real Estate is 2.49 times less risky than American Hotel. It trades about 0.31 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.08 per unit of risk. If you would invest  935.00  in HR Real Estate on December 2, 2024 and sell it today you would earn a total of  73.00  from holding HR Real Estate or generate 7.81% return on investment over 90 days.

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

HR Real Estate  vs.  American Hotel Income

HR Real Estate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HR Real Estate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HR Real is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

American Hotel Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Hotel Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, American Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HR Real and American Hotel

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

The idea behind HR Real Estate and American Hotel Income 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.