Correlation Between Primary Health and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Primary Health and Host Hotels 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 Primary Health and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Primary Health Properties and Host Hotels Resorts, you can compare the effects of market volatilities on Primary Health and Host Hotels 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 Primary Health with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primary Health and Host Hotels.
Diversification Opportunities for Primary Health and Host Hotels
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Primary and Host is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts and Primary Health 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 Primary Health Properties are associated (or correlated) with Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of Primary Health i.e., Primary Health and Host Hotels go up and down completely randomly.
Pair Corralation between Primary Health and Host Hotels
Assuming the 90 days trading horizon Primary Health Properties is expected to under-perform the Host Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Primary Health Properties is 1.53 times less risky than Host Hotels. The stock trades about -0.08 of its potential returns per unit of risk. The Host Hotels Resorts is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,778 in Host Hotels Resorts on August 28, 2024 and sell it today you would earn a total of 65.00 from holding Host Hotels Resorts or generate 3.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Primary Health Properties vs. Host Hotels Resorts
Performance |
| Timeline |
| Primary Health Properties |
| Host Hotels Resorts |
Primary Health and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Primary Health and Host Hotels
The main advantage of trading using opposite Primary Health and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primary Health position performs unexpectedly, Host Hotels 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 Host Hotels will offset losses from the drop in Host Hotels' long position.| Primary Health vs. Derwent London PLC | Primary Health vs. Hammerson PLC | Primary Health vs. Workspace Group PLC | Primary Health vs. Supermarket Income REIT |
| Host Hotels vs. International Consolidated Airlines | Host Hotels vs. United Airlines Holdings | Host Hotels vs. Verizon Communications | Host Hotels vs. Ameriprise Financial |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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