Correlation Between Host Hotels and Diamondrock Hospitality

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

Diversification Opportunities for Host Hotels and Diamondrock Hospitality

0.93

Correlation Coefficient

Host Hotels  Diamondrock Hospitality

Almost no diversification

The 3 months correlation between Host and Diamondrock is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Diamondrock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality 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 Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of Host Hotels i.e., Host Hotels and Diamondrock Hospitality go up and down completely randomly.

Pair Corralation between Host Hotels and Diamondrock Hospitality

Considering the 90-day investment horizon Host Hotels Resorts is expected to under-perform the Diamondrock Hospitality. In addition to that, Host Hotels is 1.06 times more volatile than Diamondrock Hospitality. It trades about -0.2 of its total potential returns per unit of risk. Diamondrock Hospitality is currently generating about -0.14 per unit of volatility. If you would invest  884.00  in Diamondrock Hospitality on December 29, 2024 and sell it today you would lose (113.00) from holding Diamondrock Hospitality or give up 12.78% of portfolio value over 90 days.

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

Host Hotels Resorts  vs.  Diamondrock Hospitality

Host Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Host Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Diamondrock Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamondrock Hospitality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Host Hotels and Diamondrock Hospitality

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

The idea behind Host Hotels Resorts and Diamondrock Hospitality 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.