Correlation Between MHP Hotel and Patterson Companies

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

Diversification Opportunities for MHP Hotel and Patterson Companies

-0.22

Correlation Coefficient

MHP Hotel  Patterson Companies

Very good diversification

The 3 months correlation between MHP and Patterson is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of MHP Hotel i.e., MHP Hotel and Patterson Companies go up and down completely randomly.

Pair Corralation between MHP Hotel and Patterson Companies

Assuming the 90 days trading horizon MHP Hotel AG is expected to generate 3.01 times more return on investment than Patterson Companies. However, MHP Hotel is 3.01 times more volatile than Patterson Companies. It trades about 0.1 of its potential returns per unit of risk. Patterson Companies is currently generating about -0.04 per unit of risk. If you would invest  118.00  in MHP Hotel AG on December 23, 2024 and sell it today you would earn a total of  20.00  from holding MHP Hotel AG or generate 16.95% 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.  Patterson Companies

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 8 (%) 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.

Patterson Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Patterson Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Patterson Companies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MHP Hotel and Patterson Companies

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

The idea behind MHP Hotel AG and Patterson Companies 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.