Correlation Between H World and North American

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

Diversification Opportunities for H World and North American

CL4ANorthDiversified AwayCL4ANorthDiversified Away100%
-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between CL4A and North is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding H World Group and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and H World 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 H World Group are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of H World i.e., H World and North American go up and down completely randomly.

Pair Corralation between H World and North American

Assuming the 90 days trading horizon H World Group is expected to under-perform the North American. But the stock apears to be less risky and, when comparing its historical volatility, H World Group is 1.34 times less risky than North American. The stock trades about -0.09 of its potential returns per unit of risk. The North American Construction is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,500  in North American Construction on October 21, 2024 and sell it today you would earn a total of  540.00  from holding North American Construction or generate 36.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

H World Group  vs.  North American Construction

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -20-100102030
JavaScript chart by amCharts 3.21.15CL4A N5Z
       Timeline  
H World Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days H World Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan303132333435
North American Const 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan15161718192021

H World and North American Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.89-2.91-1.94-0.960.00.831.682.543.394.25 0.040.050.060.07
JavaScript chart by amCharts 3.21.15CL4A N5Z
       Returns  

Pair Trading with H World and North American

The main advantage of trading using opposite H World and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H World position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.
The idea behind H World Group and North American Construction 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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