Correlation Between Primary Health and Host Hotels

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

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

Diversification Opportunities for Primary Health and Host Hotels

-0.45

Correlation Coefficient

Primary Health  Host Hotels

Very good diversification

The 3 months correlation between Primary and Host is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties 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 Primary Health 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 Primary Health Properties 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 Primary Health i.e., Primary Health and Host Hotels go up and down completely randomly.

Pair Corralation between Primary Health and Host Hotels

Assuming the 90 days trading horizon Primary Health Properties is expected to under-perform the Host Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Primary Health Properties is 1.7 times less risky than Host Hotels. The stock trades about -0.04 of its potential returns per unit of risk. The Host Hotels Resorts is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,367  in Host Hotels Resorts on April 23, 2025 and sell it today you would earn a total of  259.00  from holding Host Hotels Resorts or generate 18.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Primary Health Properties  vs.  Host Hotels Resorts

Primary Health Properties

Risk-Adjusted Performance

Very Weak

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

Host Hotels Resorts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Host Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primary Health and Host Hotels

The main advantage of trading using opposite Primary Health and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primary Health 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 Primary Health Properties 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 Transaction History module to view history of all your transactions and understand their impact on performance.