Correlation Between Host Hotels and Align Technology
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Align Technology 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 Host Hotels and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Host Hotels Resorts and Align Technology, you can compare the effects of market volatilities on Host Hotels and Align Technology 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 Host Hotels with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Align Technology.
Diversification Opportunities for Host Hotels and Align Technology
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Host and Align is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Host Hotels 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 Host Hotels Resorts are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Host Hotels i.e., Host Hotels and Align Technology go up and down completely randomly.
Pair Corralation between Host Hotels and Align Technology
Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.72 times more return on investment than Align Technology. However, Host Hotels Resorts is 1.39 times less risky than Align Technology. It trades about -0.22 of its potential returns per unit of risk. Align Technology is currently generating about -0.27 per unit of risk. If you would invest 1,749 in Host Hotels Resorts on October 11, 2024 and sell it today you would lose (109.00) from holding Host Hotels Resorts or give up 6.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Host Hotels Resorts vs. Align Technology
Performance |
| Timeline |
| Host Hotels Resorts |
| Align Technology |
Host Hotels and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and Align Technology
The main advantage of trading using opposite Host Hotels and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.| Host Hotels vs. Suntory Beverage Food | Host Hotels vs. American Public Education | Host Hotels vs. EMBARK EDUCATION LTD | Host Hotels vs. China Resources Beer |
| Align Technology vs. TRADEDOUBLER AB SK | Align Technology vs. Northern Data AG | Align Technology vs. Alliance Data Systems | Align Technology vs. INFORMATION SVC GRP |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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