Correlation Between Host Hotels and WILLIS LEASE
Can any of the company-specific risk be diversified away by investing in both Host Hotels and WILLIS LEASE 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 WILLIS LEASE 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 WILLIS LEASE FIN, you can compare the effects of market volatilities on Host Hotels and WILLIS LEASE 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 WILLIS LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and WILLIS LEASE.
Diversification Opportunities for Host Hotels and WILLIS LEASE
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Host and WILLIS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Host Hotels i.e., Host Hotels and WILLIS LEASE go up and down completely randomly.
Pair Corralation between Host Hotels and WILLIS LEASE
Assuming the 90 days horizon Host Hotels is expected to generate 9.45 times less return on investment than WILLIS LEASE. But when comparing it to its historical volatility, Host Hotels Resorts is 1.68 times less risky than WILLIS LEASE. It trades about 0.02 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,506 in WILLIS LEASE FIN on August 27, 2024 and sell it today you would earn a total of 14,094 from holding WILLIS LEASE FIN or generate 312.78% 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. WILLIS LEASE FIN
Performance |
| Timeline |
| Host Hotels Resorts |
| WILLIS LEASE FIN |
Host Hotels and WILLIS LEASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and WILLIS LEASE
The main advantage of trading using opposite Host Hotels and WILLIS LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, WILLIS LEASE 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 WILLIS LEASE will offset losses from the drop in WILLIS LEASE's long position.The idea behind Host Hotels Resorts and WILLIS LEASE FIN 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.| WILLIS LEASE vs. HANOVER INSURANCE | WILLIS LEASE vs. Ping An Insurance | WILLIS LEASE vs. THAI BEVERAGE | WILLIS LEASE vs. Tower One Wireless |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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