Correlation Between RTW Venture and Host Hotels

Can any of the company-specific risk be diversified away by investing in both RTW Venture 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 RTW Venture and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RTW Venture Fund and Host Hotels Resorts, you can compare the effects of market volatilities on RTW Venture 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 RTW Venture with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of RTW Venture and Host Hotels.

Diversification Opportunities for RTW Venture and Host Hotels

-0.29

Correlation Coefficient

RTW Venture  Host Hotels

Very good diversification

The 3 months correlation between RTW and Host is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding RTW Venture Fund 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 RTW Venture 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 RTW Venture Fund 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 RTW Venture i.e., RTW Venture and Host Hotels go up and down completely randomly.

Pair Corralation between RTW Venture and Host Hotels

Assuming the 90 days trading horizon RTW Venture Fund is expected to under-perform the Host Hotels. But the stock apears to be less risky and, when comparing its historical volatility, RTW Venture Fund is 1.75 times less risky than Host Hotels. The stock trades about -0.07 of its potential returns per unit of risk. The Host Hotels Resorts is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,717  in Host Hotels Resorts on September 3, 2024 and sell it today you would earn a total of  135.00  from holding Host Hotels Resorts or generate 7.86% return on investment over 90 days.

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

RTW Venture Fund  vs.  Host Hotels Resorts

RTW Venture Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTW Venture Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RTW Venture is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Host Hotels Resorts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RTW Venture and Host Hotels

The main advantage of trading using opposite RTW Venture and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RTW Venture 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.

The idea behind RTW Venture Fund and Host Hotels Resorts 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.