Correlation Between MPH Health and INTERCONT HOTELS

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Can any of the company-specific risk be diversified away by investing in both MPH Health and INTERCONT 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 MPH Health and INTERCONT HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MPH Health Care and INTERCONT HOTELS, you can compare the effects of market volatilities on MPH Health and INTERCONT 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 MPH Health with a short position of INTERCONT HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPH Health and INTERCONT HOTELS.

Diversification Opportunities for MPH Health and INTERCONT HOTELS

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between MPH and INTERCONT is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS and MPH 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 MPH Health Care are associated (or correlated) with INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of MPH Health i.e., MPH Health and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between MPH Health and INTERCONT HOTELS

Assuming the 90 days trading horizon MPH Health Care is expected to under-perform the INTERCONT HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, MPH Health Care is 1.01 times less risky than INTERCONT HOTELS. The stock trades about 0.0 of its potential returns per unit of risk. The INTERCONT HOTELS is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  9,700  in INTERCONT HOTELS on October 8, 2024 and sell it today you would earn a total of  2,300  from holding INTERCONT HOTELS or generate 23.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MPH Health Care  vs.  INTERCONT HOTELS

 Performance 
       Timeline  
MPH Health Care 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in INTERCONT HOTELS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, INTERCONT HOTELS reported solid returns over the last few months and may actually be approaching a breakup point.

MPH Health and INTERCONT HOTELS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MPH Health and INTERCONT HOTELS

The main advantage of trading using opposite MPH Health and INTERCONT HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPH Health position performs unexpectedly, INTERCONT 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 INTERCONT HOTELS will offset losses from the drop in INTERCONT HOTELS's long position.
The idea behind MPH Health Care and INTERCONT HOTELS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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