Correlation Between Hilton Worldwide and National Grid

Can any of the company-specific risk be diversified away by investing in both Hilton Worldwide and National Grid 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 Hilton Worldwide and National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hilton Worldwide Holdings and National Grid PLC, you can compare the effects of market volatilities on Hilton Worldwide and National Grid 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 Hilton Worldwide with a short position of National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and National Grid.

Diversification Opportunities for Hilton Worldwide and National Grid

-0.41

Correlation Coefficient

Hilton Worldwide  National Grid

Very good diversification

The 3 months correlation between Hilton and National is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC and Hilton Worldwide 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 Hilton Worldwide Holdings are associated (or correlated) with National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and National Grid go up and down completely randomly.

Pair Corralation between Hilton Worldwide and National Grid

Assuming the 90 days trading horizon Hilton Worldwide Holdings is expected to under-perform the National Grid. But the stock apears to be less risky and, when comparing its historical volatility, Hilton Worldwide Holdings is 1.84 times less risky than National Grid. The stock trades about -0.19 of its potential returns per unit of risk. The National Grid PLC is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,150  in National Grid PLC on October 13, 2024 and sell it today you would lose (30.00) from holding National Grid PLC or give up 2.61% of portfolio value over 90 days.

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

Hilton Worldwide Holdings  vs.  National Grid PLC

Hilton Worldwide Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Hilton Worldwide may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National Grid PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hilton Worldwide and National Grid

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

The idea behind Hilton Worldwide Holdings and National Grid PLC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.