Correlation Between Dow Jones and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Host Hotels Resorts, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Host Hotels.
Diversification Opportunities for Dow Jones and Host Hotels
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Host is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Host Hotels go up and down completely randomly.
Pair Corralation between Dow Jones and Host Hotels
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.43 times more return on investment than Host Hotels. However, Dow Jones Industrial is 2.31 times less risky than Host Hotels. It trades about 0.21 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.06 per unit of risk. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Host Hotels Resorts
Performance |
| Timeline |
Dow Jones and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Host Hotels Resorts
Pair trading matchups for Host Hotels
Pair Trading with Dow Jones and Host Hotels
The main advantage of trading using opposite Dow Jones and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Host Hotels vs. DELTA AIR LINES | Host Hotels vs. Tower One Wireless | Host Hotels vs. Altair Engineering | Host Hotels vs. 24SEVENOFFICE GROUP AB |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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