Correlation Between Catalent and NH HOTEL

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

By analyzing existing cross correlation between Catalent and NH HOTEL GROUP, you can compare the effects of market volatilities on Catalent and NH HOTEL 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 Catalent with a short position of NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and NH HOTEL.

Diversification Opportunities for Catalent and NH HOTEL

0.75

Correlation Coefficient

Catalent  NH HOTEL

Poor diversification

The 3 months correlation between Catalent and NH5 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and NH HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH HOTEL GROUP and Catalent 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 Catalent are associated (or correlated) with NH HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH HOTEL GROUP has no effect on the direction of Catalent i.e., Catalent and NH HOTEL go up and down completely randomly.

Pair Corralation between Catalent and NH HOTEL

Assuming the 90 days horizon Catalent is expected to generate 3.34 times less return on investment than NH HOTEL. But when comparing it to its historical volatility, Catalent is 4.78 times less risky than NH HOTEL. It trades about 0.15 of its potential returns per unit of risk. NH HOTEL GROUP is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  409.00  in NH HOTEL GROUP on October 4, 2024 and sell it today you would earn a total of  217.00  from holding NH HOTEL GROUP or generate 53.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.97%
Values	Daily Returns

Catalent  vs.  NH HOTEL GROUP

Catalent

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NH HOTEL GROUP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NH HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and NH HOTEL

The main advantage of trading using opposite Catalent and NH HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent position performs unexpectedly, NH HOTEL 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 NH HOTEL will offset losses from the drop in NH HOTEL's long position.

The idea behind Catalent and NH HOTEL GROUP 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.