Correlation Between Host Hotels and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on Host Hotels and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Sterling Construction.
Diversification Opportunities for Host Hotels and Sterling Construction
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Host and Sterling is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Host Hotels i.e., Host Hotels and Sterling Construction go up and down completely randomly.
Pair Corralation between Host Hotels and Sterling Construction
Assuming the 90 days horizon Host Hotels is expected to generate 6.17 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, Host Hotels Resorts is 1.82 times less risky than Sterling Construction. It trades about 0.04 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,000 in Sterling Construction on September 20, 2024 and sell it today you would earn a total of 13,810 from holding Sterling Construction or generate 460.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Host Hotels Resorts vs. Sterling Construction
Performance |
| Timeline |
| Host Hotels Resorts |
| Sterling Construction |
Host Hotels and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and Sterling Construction
The main advantage of trading using opposite Host Hotels and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| Host Hotels vs. Silicon Motion Technology | Host Hotels vs. CARSALESCOM | Host Hotels vs. GRUPO CARSO A1 | Host Hotels vs. NISSAN CHEMICAL IND |
| Sterling Construction vs. MELIA HOTELS | Sterling Construction vs. CDL INVESTMENT | Sterling Construction vs. Host Hotels Resorts | Sterling Construction vs. InterContinental Hotels 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 CEOs Directory module to screen CEOs from public companies around the world.
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