Correlation Between Applied Materials and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Host Hotels Resorts, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Host Hotels.
Diversification Opportunities for Applied Materials and Host Hotels
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and Host is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Host Hotels go up and down completely randomly.
Pair Corralation between Applied Materials and Host Hotels
Assuming the 90 days trading horizon Applied Materials is expected to generate 11.4 times less return on investment than Host Hotels. In addition to that, Applied Materials is 1.89 times more volatile than Host Hotels Resorts. It trades about 0.01 of its total potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.18 per unit of volatility. If you would invest 1,733 in Host Hotels Resorts on September 4, 2024 and sell it today you would earn a total of 100.00 from holding Host Hotels Resorts or generate 5.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Host Hotels Resorts
Performance |
| Timeline |
| Applied Materials |
| Host Hotels Resorts |
Applied Materials and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Host Hotels
The main advantage of trading using opposite Applied Materials and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Samsung Electronics Co | Applied Materials vs. Hyundai Motor | Applied Materials vs. Toyota Motor Corp |
| Host Hotels vs. Zurich Insurance Group | Host Hotels vs. Synthomer plc | Host Hotels vs. Public Storage | Host Hotels vs. bet at home AG |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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