Correlation Between Iron Road and MHP Hotel

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

By analyzing existing cross correlation between Iron Road Limited and MHP Hotel AG, you can compare the effects of market volatilities on Iron Road and MHP 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 Iron Road with a short position of MHP Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and MHP Hotel.

Diversification Opportunities for Iron Road and MHP Hotel

-0.66

Correlation Coefficient

Iron Road  MHP Hotel

Excellent diversification

The 3 months correlation between Iron and MHP is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and MHP Hotel AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MHP Hotel AG and Iron Road 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 Iron Road Limited are associated (or correlated) with MHP Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MHP Hotel AG has no effect on the direction of Iron Road i.e., Iron Road and MHP Hotel go up and down completely randomly.

Pair Corralation between Iron Road and MHP Hotel

Assuming the 90 days horizon Iron Road Limited is expected to generate 6.55 times more return on investment than MHP Hotel. However, Iron Road is 6.55 times more volatile than MHP Hotel AG. It trades about 0.06 of its potential returns per unit of risk. MHP Hotel AG is currently generating about 0.01 per unit of risk. If you would invest  4.70  in Iron Road Limited on October 21, 2024 and sell it today you would lose (2.40) from holding Iron Road Limited or give up 51.06% of portfolio value over 90 days.

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

Iron Road Limited  vs.  MHP Hotel AG

Iron Road Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MHP Hotel AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, MHP Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and MHP Hotel

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

The idea behind Iron Road Limited and MHP Hotel AG 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.