Correlation Between GM and Host Hotels
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Host Hotels Resorts, you can compare the effects of market volatilities on GM 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 GM with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Host Hotels.
Diversification Opportunities for GM and Host Hotels
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Host is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Host Hotels go up and down completely randomly.
Pair Corralation between GM and Host Hotels
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.17 times more return on investment than Host Hotels. However, GM is 1.17 times more volatile than Host Hotels Resorts. It trades about 0.12 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.01 per unit of risk. If you would invest 4,287 in General Motors on August 25, 2024 and sell it today you would earn a total of 1,566 from holding General Motors or generate 36.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.92% |
| Values | Daily Returns |
General Motors vs. Host Hotels Resorts
Performance |
| Timeline |
| General Motors |
| Host Hotels Resorts |
GM and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Host Hotels
The main advantage of trading using opposite GM and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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