Correlation Between Host Hotels and United Parcel

Can any of the company-specific risk be diversified away by investing in both Host Hotels and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on Host Hotels and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and United Parcel.

Diversification Opportunities for Host Hotels and United Parcel

-0.1

Correlation Coefficient

Host Hotels  United Parcel

Good diversification

The 3 months correlation between Host and United is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Host Hotels i.e., Host Hotels and United Parcel go up and down completely randomly.

Pair Corralation between Host Hotels and United Parcel

Assuming the 90 days trading horizon Host Hotels Resorts is expected to generate 0.99 times more return on investment than United Parcel. However, Host Hotels Resorts is 1.01 times less risky than United Parcel. It trades about 0.11 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.02 per unit of risk. If you would invest  1,733  in Host Hotels Resorts on September 14, 2024 and sell it today you would earn a total of  160.00  from holding Host Hotels Resorts or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Host Hotels Resorts  vs.  United Parcel Service

Host Hotels Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Parcel Service

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Host Hotels and United Parcel

The main advantage of trading using opposite Host Hotels and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.

The idea behind Host Hotels Resorts and United Parcel Service pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.