Correlation Between Spirent Communications and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and Host Hotels Resorts, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Host Hotels.
Diversification Opportunities for Spirent Communications and Host Hotels
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirent and Host is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc 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 Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Host Hotels go up and down completely randomly.
Pair Corralation between Spirent Communications and Host Hotels
Assuming the 90 days trading horizon Spirent Communications plc is expected to under-perform the Host Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Spirent Communications plc is 1.73 times less risky than Host Hotels. The stock trades about -0.01 of its potential returns per unit of risk. The Host Hotels Resorts is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,764 in Host Hotels Resorts on August 30, 2024 and sell it today you would earn a total of 86.00 from holding Host Hotels Resorts or generate 4.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Spirent Communications plc vs. Host Hotels Resorts
Performance |
| Timeline |
| Spirent Communications |
| Host Hotels Resorts |
Spirent Communications and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Host Hotels
The main advantage of trading using opposite Spirent Communications and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. Lloyds Banking Group | Spirent Communications vs. Premier African Minerals | Spirent Communications vs. 88 Energy | Spirent Communications vs. Vodafone Group PLC |
| Host Hotels vs. Gaming Realms plc | Host Hotels vs. Polar Capital Technology | Host Hotels vs. Compagnie Plastic Omnium | Host Hotels vs. Take Two Interactive Software |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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