Correlation Between MHP Hotel and NTG Nordic

Can any of the company-specific risk be diversified away by investing in both MHP Hotel and NTG Nordic 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 NTG Nordic 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 NTG Nordic Transport, you can compare the effects of market volatilities on MHP Hotel and NTG Nordic 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 NTG Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of MHP Hotel and NTG Nordic.

Diversification Opportunities for MHP Hotel and NTG Nordic

-0.34

Correlation Coefficient

MHP Hotel  NTG Nordic

Very good diversification

The 3 months correlation between MHP and NTG is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and NTG Nordic Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTG Nordic Transport 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 NTG Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTG Nordic Transport has no effect on the direction of MHP Hotel i.e., MHP Hotel and NTG Nordic go up and down completely randomly.

Pair Corralation between MHP Hotel and NTG Nordic

Assuming the 90 days trading horizon MHP Hotel AG is expected to generate 1.51 times more return on investment than NTG Nordic. However, MHP Hotel is 1.51 times more volatile than NTG Nordic Transport. It trades about 0.1 of its potential returns per unit of risk. NTG Nordic Transport is currently generating about 0.03 per unit of risk. If you would invest  120.00  in MHP Hotel AG on December 20, 2024 and sell it today you would earn a total of  18.00  from holding MHP Hotel AG or generate 15.0% return on investment over 90 days.

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

MHP Hotel AG  vs.  NTG Nordic Transport

MHP Hotel AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 7 (%) 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.

NTG Nordic Transport

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NTG Nordic Transport are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NTG Nordic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MHP Hotel and NTG Nordic

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

The idea behind MHP Hotel AG and NTG Nordic Transport 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.