Correlation Between United Rentals and Host Hotels
Can any of the company-specific risk be diversified away by investing in both United Rentals 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 United Rentals and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Host Hotels Resorts, you can compare the effects of market volatilities on United Rentals 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 United Rentals with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Host Hotels.
Diversification Opportunities for United Rentals and Host Hotels
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Host is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals 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 United Rentals 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 United Rentals 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 United Rentals i.e., United Rentals and Host Hotels go up and down completely randomly.
Pair Corralation between United Rentals and Host Hotels
Assuming the 90 days horizon United Rentals is expected to generate 1.59 times more return on investment than Host Hotels. However, United Rentals is 1.59 times more volatile than Host Hotels Resorts. It trades about 0.27 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about -0.17 per unit of risk. If you would invest 67,060 in United Rentals on November 6, 2024 and sell it today you would earn a total of 8,220 from holding United Rentals or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Host Hotels Resorts
Performance |
| Timeline |
| United Rentals |
| Host Hotels Resorts |
United Rentals and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Host Hotels
The main advantage of trading using opposite United Rentals and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals 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.| United Rentals vs. SEI INVESTMENTS | United Rentals vs. Guangdong Investment Limited | United Rentals vs. PennantPark Investment | United Rentals vs. Cognizant Technology Solutions |
| Host Hotels vs. Playa Hotels Resorts | Host Hotels vs. Fast Retailing Co | Host Hotels vs. HYATT HOTELS A | Host Hotels vs. SCANSOURCE |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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