Correlation Between Carmat SA and MHP Hotel

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

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

Diversification Opportunities for Carmat SA and MHP Hotel

-0.34

Correlation Coefficient

Carmat SA  MHP Hotel

Very good diversification

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

Pair Corralation between Carmat SA and MHP Hotel

Assuming the 90 days horizon Carmat SA is expected to under-perform the MHP Hotel. In addition to that, Carmat SA is 2.42 times more volatile than MHP Hotel AG. It trades about -0.04 of its total potential returns per unit of risk. MHP Hotel AG is currently generating about 0.02 per unit of volatility. If you would invest  115.00  in MHP Hotel AG on October 9, 2024 and sell it today you would earn a total of  12.00  from holding MHP Hotel AG or generate 10.43% return on investment over 90 days.

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

Carmat SA  vs.  MHP Hotel AG

Carmat SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

MHP Hotel AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Carmat SA and MHP Hotel

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

The idea behind Carmat SA and MHP Hotel AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.