Correlation Between Host Hotels and Chatham Lodging
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Chatham Lodging 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 Chatham Lodging 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 Chatham Lodging Trust, you can compare the effects of market volatilities on Host Hotels and Chatham Lodging 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 Chatham Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Chatham Lodging.
Diversification Opportunities for Host Hotels and Chatham Lodging
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Host and Chatham is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging 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 Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of Host Hotels i.e., Host Hotels and Chatham Lodging go up and down completely randomly.
Pair Corralation between Host Hotels and Chatham Lodging
Considering the 90-day investment horizon Host Hotels Resorts is expected to generate 0.8 times more return on investment than Chatham Lodging. However, Host Hotels Resorts is 1.25 times less risky than Chatham Lodging. It trades about 0.01 of its potential returns per unit of risk. Chatham Lodging Trust is currently generating about -0.01 per unit of risk. If you would invest 1,545 in Host Hotels Resorts on November 28, 2024 and sell it today you would earn a total of 56.00 from holding Host Hotels Resorts or generate 3.62% 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. Chatham Lodging Trust
Performance |
| Timeline |
| Host Hotels Resorts |
| Chatham Lodging Trust |
Host Hotels and Chatham Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and Chatham Lodging
The main advantage of trading using opposite Host Hotels and Chatham Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Chatham Lodging 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 Chatham Lodging will offset losses from the drop in Chatham Lodging's long position.| Host Hotels vs. Service Properties Trust | Host Hotels vs. Diamondrock Hospitality | Host Hotels vs. Sunstone Hotel Investors | Host Hotels vs. Ryman Hospitality Properties |
| Chatham Lodging vs. Summit Hotel Properties | Chatham Lodging vs. RLJ Lodging Trust | Chatham Lodging vs. Pebblebrook Hotel Trust | Chatham Lodging vs. Whitestone REIT |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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