Correlation Between International Biotechnology and Host Hotels

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Can any of the company-specific risk be diversified away by investing in both International Biotechnology and Host Hotels 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 International Biotechnology and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Biotechnology Trust and Host Hotels Resorts, you can compare the effects of market volatilities on International Biotechnology and Host Hotels 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 International Biotechnology with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Host Hotels.

Diversification Opportunities for International Biotechnology and Host Hotels

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between International and Host is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts and International Biotechnology 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 International Biotechnology Trust are associated (or correlated) with Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of International Biotechnology i.e., International Biotechnology and Host Hotels go up and down completely randomly.

Pair Corralation between International Biotechnology and Host Hotels

Assuming the 90 days trading horizon International Biotechnology is expected to generate 2.08 times less return on investment than Host Hotels. But when comparing it to its historical volatility, International Biotechnology Trust is 1.13 times less risky than Host Hotels. It trades about 0.07 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,655  in Host Hotels Resorts on September 6, 2024 and sell it today you would earn a total of  192.00  from holding Host Hotels Resorts or generate 11.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

International Biotechnology Tr  vs.  Host Hotels Resorts

 Performance 
       Timeline  
International Biotechnology 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, International Biotechnology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Host Hotels Resorts 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

International Biotechnology and Host Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Biotechnology and Host Hotels

The main advantage of trading using opposite International Biotechnology and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology position performs unexpectedly, Host Hotels 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 Host Hotels will offset losses from the drop in Host Hotels' long position.
The idea behind International Biotechnology Trust and Host Hotels Resorts 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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