Correlation Between MHP Hotel and Papa Johns

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

Diversification Opportunities for MHP Hotel and Papa Johns

-0.55

Correlation Coefficient

MHP Hotel  Papa Johns

Excellent diversification

The 3 months correlation between MHP and Papa is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and Papa Johns International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papa Johns International 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 Papa Johns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papa Johns International has no effect on the direction of MHP Hotel i.e., MHP Hotel and Papa Johns go up and down completely randomly.

Pair Corralation between MHP Hotel and Papa Johns

Assuming the 90 days trading horizon MHP Hotel AG is expected to generate 0.66 times more return on investment than Papa Johns. However, MHP Hotel AG is 1.51 times less risky than Papa Johns. It trades about 0.13 of its potential returns per unit of risk. Papa Johns International is currently generating about -0.17 per unit of risk. If you would invest  118.00  in MHP Hotel AG on October 8, 2024 and sell it today you would earn a total of  6.00  from holding MHP Hotel AG or generate 5.08% return on investment over 90 days.

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

MHP Hotel AG  vs.  Papa Johns International

MHP Hotel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MHP Hotel AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MHP Hotel is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Papa Johns International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Papa Johns 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 Papa Johns

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

The idea behind MHP Hotel AG and Papa Johns International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.