Correlation Between Young Cos and Host Hotels

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

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

Diversification Opportunities for Young Cos and Host Hotels

0.64

Correlation Coefficient

Young Cos  Host Hotels

Poor diversification

The 3 months correlation between Young and Host is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Young Cos Brewery 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 Young Cos 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 Young Cos Brewery 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 Young Cos i.e., Young Cos and Host Hotels go up and down completely randomly.

Pair Corralation between Young Cos and Host Hotels

Assuming the 90 days trading horizon Young Cos is expected to generate 2.08 times less return on investment than Host Hotels. But when comparing it to its historical volatility, Young Cos Brewery is 1.07 times less risky than Host Hotels. It trades about 0.02 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,761  in Host Hotels Resorts on September 28, 2024 and sell it today you would earn a total of  65.00  from holding Host Hotels Resorts or generate 3.69% return on investment over 90 days.

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

Young Cos Brewery  vs.  Host Hotels Resorts

Young Cos Brewery

Risk-Adjusted Performance

1 of 100

Weak

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

Host Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Host Hotels 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 Young Cos and Host Hotels

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.