Correlation Between Host Hotels and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Diamondrock Hospitality 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 Diamondrock Hospitality 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 Diamondrock Hospitality, you can compare the effects of market volatilities on Host Hotels and Diamondrock Hospitality 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 Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Diamondrock Hospitality.
Diversification Opportunities for Host Hotels and Diamondrock Hospitality
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Host and Diamondrock is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Diamondrock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality 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 Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of Host Hotels i.e., Host Hotels and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between Host Hotels and Diamondrock Hospitality
Considering the 90-day investment horizon Host Hotels is expected to generate 1.31 times less return on investment than Diamondrock Hospitality. But when comparing it to its historical volatility, Host Hotels Resorts is 1.38 times less risky than Diamondrock Hospitality. It trades about 0.14 of its potential returns per unit of risk. Diamondrock Hospitality is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 889.00 in Diamondrock Hospitality on August 28, 2024 and sell it today you would earn a total of 46.00 from holding Diamondrock Hospitality or generate 5.17% 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. Diamondrock Hospitality
Performance |
| Timeline |
| Host Hotels Resorts |
| Diamondrock Hospitality |
Host Hotels and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and Diamondrock Hospitality
The main advantage of trading using opposite Host Hotels and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Diamondrock Hospitality 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 Diamondrock Hospitality will offset losses from the drop in Diamondrock Hospitality'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 |
| Diamondrock Hospitality vs. Summit Hotel Properties | Diamondrock Hospitality vs. RLJ Lodging Trust | Diamondrock Hospitality vs. Pebblebrook Hotel Trust | Diamondrock Hospitality vs. Sunstone Hotel Investors |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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