Correlation Between SOHO China and Host Hotels
Can any of the company-specific risk be diversified away by investing in both SOHO China 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 SOHO China and Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOHO China Limited and Host Hotels Resorts, you can compare the effects of market volatilities on SOHO China 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 SOHO China with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOHO China and Host Hotels.
Diversification Opportunities for SOHO China and Host Hotels
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SOHO and Host is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SOHO China Limited 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 SOHO China 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 SOHO China Limited 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 SOHO China i.e., SOHO China and Host Hotels go up and down completely randomly.
Pair Corralation between SOHO China and Host Hotels
Assuming the 90 days horizon SOHO China Limited is expected to under-perform the Host Hotels. In addition to that, SOHO China is 1.35 times more volatile than Host Hotels Resorts. It trades about -0.04 of its total potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.01 per unit of volatility. If you would invest 1,905 in Host Hotels Resorts on January 19, 2024 and sell it today you would lose (30.00) from holding Host Hotels Resorts or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOHO China Limited vs. Host Hotels Resorts
Performance |
| Timeline |
| SOHO China Limited |
| Host Hotels Resorts |
SOHO China and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOHO China and Host Hotels
The main advantage of trading using opposite SOHO China and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOHO China 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.| SOHO China vs. Marcus Millichap | SOHO China vs. Digitalbridge Group | SOHO China vs. Jones Lang LaSalle | SOHO China vs. CBRE Group Class |
| Host Hotels vs. RLJ Lodging Trust | Host Hotels vs. Pebblebrook Hotel Trust | Host Hotels vs. Sunstone Hotel Investors |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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