Correlation Between Host Hotels and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Host Hotels and MGIC Investment 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 MGIC Investment 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 MGIC Investment, you can compare the effects of market volatilities on Host Hotels and MGIC Investment 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 MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and MGIC Investment.
Diversification Opportunities for Host Hotels and MGIC Investment
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Host and MGIC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and MGIC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment 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 MGIC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC Investment has no effect on the direction of Host Hotels i.e., Host Hotels and MGIC Investment go up and down completely randomly.
Pair Corralation between Host Hotels and MGIC Investment
Assuming the 90 days horizon Host Hotels Resorts is expected to generate 1.0 times more return on investment than MGIC Investment. However, Host Hotels is 1.0 times more volatile than MGIC Investment. It trades about 0.18 of its potential returns per unit of risk. MGIC Investment is currently generating about 0.06 per unit of risk. If you would invest 1,680 in Host Hotels Resorts on September 15, 2024 and sell it today you would earn a total of 90.00 from holding Host Hotels Resorts or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Host Hotels Resorts vs. MGIC Investment
Performance |
| Timeline |
| Host Hotels Resorts |
| MGIC Investment |
Host Hotels and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and MGIC Investment
The main advantage of trading using opposite Host Hotels and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, MGIC Investment 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 MGIC Investment will offset losses from the drop in MGIC Investment's long position.| Host Hotels vs. Fast Retailing Co | Host Hotels vs. TRADEDOUBLER AB SK | Host Hotels vs. Carsales | Host Hotels vs. bet at home AG |
| MGIC Investment vs. First American Financial | MGIC Investment vs. Lancashire Holdings Limited | MGIC Investment vs. Trisura Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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