Correlation Between Diamondrock Hospitality and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality 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 Diamondrock Hospitality and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamondrock Hospitality and Host Hotels Resorts, you can compare the effects of market volatilities on Diamondrock Hospitality 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 Diamondrock Hospitality with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Host Hotels.
Diversification Opportunities for Diamondrock Hospitality and Host Hotels
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diamondrock and Host is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality 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 Diamondrock Hospitality 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 Diamondrock Hospitality 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 Diamondrock Hospitality i.e., Diamondrock Hospitality and Host Hotels go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Host Hotels
Considering the 90-day investment horizon Diamondrock Hospitality is expected to generate 1.37 times less return on investment than Host Hotels. In addition to that, Diamondrock Hospitality is 1.06 times more volatile than Host Hotels Resorts. It trades about 0.02 of its total potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.03 per unit of volatility. If you would invest 1,587 in Host Hotels Resorts on August 28, 2024 and sell it today you would earn a total of 255.00 from holding Host Hotels Resorts or generate 16.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamondrock Hospitality vs. Host Hotels Resorts
Performance |
| Timeline |
| Diamondrock Hospitality |
| Host Hotels Resorts |
Diamondrock Hospitality and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Host Hotels
The main advantage of trading using opposite Diamondrock Hospitality and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality 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.| Diamondrock Hospitality vs. Summit Hotel Properties | Diamondrock Hospitality vs. RLJ Lodging Trust | Diamondrock Hospitality vs. Pebblebrook Hotel Trust | Diamondrock Hospitality vs. Sunstone Hotel Investors |
| Host Hotels vs. Service Properties Trust | Host Hotels vs. Diamondrock Hospitality | Host Hotels vs. Sunstone Hotel Investors | Host Hotels vs. Ryman Hospitality Properties |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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