Correlation Between Sovereign Metals and Host Hotels

Can any of the company-specific risk be diversified away by investing in both Sovereign Metals 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 Sovereign Metals and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sovereign Metals and Host Hotels Resorts, you can compare the effects of market volatilities on Sovereign Metals 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 Sovereign Metals with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and Host Hotels.

Diversification Opportunities for Sovereign Metals and Host Hotels

-0.3

Correlation Coefficient

Sovereign Metals  Host Hotels

Very good diversification

The 3 months correlation between Sovereign and Host is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals i.e., Sovereign Metals and Host Hotels go up and down completely randomly.

Pair Corralation between Sovereign Metals and Host Hotels

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 1.55 times more return on investment than Host Hotels. However, Sovereign Metals is 1.55 times more volatile than Host Hotels Resorts. It trades about 0.08 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about -0.13 per unit of risk. If you would invest  4,050  in Sovereign Metals on December 2, 2024 and sell it today you would earn a total of  400.00  from holding Sovereign Metals or generate 9.88% return on investment over 90 days.

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

Sovereign Metals  vs.  Host Hotels Resorts

Sovereign Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sovereign Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sovereign Metals and Host Hotels

The main advantage of trading using opposite Sovereign Metals and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovereign Metals 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 Sovereign Metals 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.