Correlation Between MHP Hotel and Apple

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

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

Diversification Opportunities for MHP Hotel and Apple

0.53

Correlation Coefficient

MHP Hotel  Apple

Very weak diversification

The 3 months correlation between MHP and Apple is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and MHP Hotel 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 MHP Hotel AG are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of MHP Hotel i.e., MHP Hotel and Apple go up and down completely randomly.

Pair Corralation between MHP Hotel and Apple

Assuming the 90 days trading horizon MHP Hotel is expected to generate 3.23 times less return on investment than Apple. In addition to that, MHP Hotel is 1.65 times more volatile than Apple Inc. It trades about 0.01 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.08 per unit of volatility. If you would invest  16,935  in Apple Inc on October 4, 2024 and sell it today you would earn a total of  7,320  from holding Apple Inc or generate 43.22% return on investment over 90 days.

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

MHP Hotel AG  vs.  Apple Inc

MHP Hotel AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MHP Hotel and Apple

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

The idea behind MHP Hotel AG and Apple Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.