Correlation Between Commonwealth Bank and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and Host Hotels Resorts, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Host Hotels.
Diversification Opportunities for Commonwealth Bank and Host Hotels
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and Host is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of 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 Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and Host Hotels go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Host Hotels
Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.62 times more return on investment than Host Hotels. However, Commonwealth Bank of is 1.62 times less risky than Host Hotels. It trades about 0.41 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.19 per unit of risk. If you would invest 8,662 in Commonwealth Bank of on September 1, 2024 and sell it today you would earn a total of 1,144 from holding Commonwealth Bank of or generate 13.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Host Hotels Resorts
Performance |
| Timeline |
| Commonwealth Bank |
| Host Hotels Resorts |
Commonwealth Bank and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Host Hotels
The main advantage of trading using opposite Commonwealth Bank and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. Playtech plc | Commonwealth Bank vs. CANON MARKETING JP | Commonwealth Bank vs. Carsales | Commonwealth Bank vs. Lion Biotechnologies |
| Host Hotels vs. Pebblebrook Hotel Trust | Host Hotels vs. Sunstone Hotel Investors | Host Hotels vs. ASHFORD HOSPITTRUST |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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