Correlation Between Host Hotels and Service Properties
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Service Properties 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 Service Properties 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 Service Properties Trust, you can compare the effects of market volatilities on Host Hotels and Service Properties 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 Service Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Service Properties.
Diversification Opportunities for Host Hotels and Service Properties
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Host and Service is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Host Hotels i.e., Host Hotels and Service Properties go up and down completely randomly.
Pair Corralation between Host Hotels and Service Properties
Assuming the 90 days horizon Host Hotels is expected to generate 1.49 times less return on investment than Service Properties. But when comparing it to its historical volatility, Host Hotels Resorts is 2.18 times less risky than Service Properties. It trades about 0.03 of its potential returns per unit of risk. Service Properties Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 274.00 in Service Properties Trust on November 1, 2024 and sell it today you would earn a total of 1.00 from holding Service Properties Trust or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Host Hotels Resorts vs. Service Properties Trust
Performance |
| Timeline |
| Host Hotels Resorts |
| Service Properties Trust |
Host Hotels and Service Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and Service Properties
The main advantage of trading using opposite Host Hotels and Service Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Service Properties 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 Service Properties will offset losses from the drop in Service Properties' long position.| Host Hotels vs. The Hanover Insurance | Host Hotels vs. Direct Line Insurance | Host Hotels vs. Planet Fitness | Host Hotels vs. Universal Health Realty |
| Service Properties vs. Host Hotels Resorts | Service Properties vs. Sunstone Hotel Investors | Service Properties vs. Xenia Hotels Resorts | Service Properties vs. Summit Hotel 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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