Correlation Between Nasdaq and Host Hotels

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

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

Diversification Opportunities for Nasdaq and Host Hotels

0.6

Correlation Coefficient

Nasdaq  Host Hotels

Poor diversification

The 3 months correlation between Nasdaq and Host is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc 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 Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Host Hotels go up and down completely randomly.

Pair Corralation between Nasdaq and Host Hotels

Given the investment horizon of 90 days Nasdaq is expected to generate 3.45 times less return on investment than Host Hotels. But when comparing it to its historical volatility, Nasdaq Inc is 1.47 times less risky than Host Hotels. It trades about 0.11 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,735  in Host Hotels Resorts on September 16, 2024 and sell it today you would earn a total of  132.00  from holding Host Hotels Resorts or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Nasdaq Inc  vs.  Host Hotels Resorts

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 uncertain basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Host Hotels

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