Correlation Between Grupo Hotelero and NOV

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

By analyzing existing cross correlation between Grupo Hotelero Santa and NOV Inc, you can compare the effects of market volatilities on Grupo Hotelero and NOV 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 Grupo Hotelero with a short position of NOV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Hotelero and NOV.

Diversification Opportunities for Grupo Hotelero and NOV

-0.38

Correlation Coefficient

Grupo Hotelero  NOV

Very good diversification

The 3 months correlation between Grupo and NOV is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc and Grupo Hotelero 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 Grupo Hotelero Santa are associated (or correlated) with NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and NOV go up and down completely randomly.

Pair Corralation between Grupo Hotelero and NOV

Assuming the 90 days trading horizon Grupo Hotelero Santa is expected to under-perform the NOV. In addition to that, Grupo Hotelero is 23.48 times more volatile than NOV Inc. It trades about -0.08 of its total potential returns per unit of risk. NOV Inc is currently generating about 0.23 per unit of volatility. If you would invest  32,092  in NOV Inc on October 5, 2024 and sell it today you would earn a total of  152.00  from holding NOV Inc or generate 0.47% return on investment over 90 days.

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

Grupo Hotelero Santa  vs.  NOV Inc

Grupo Hotelero Santa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Hotelero Santa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Grupo Hotelero is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Hotelero and NOV

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

The idea behind Grupo Hotelero Santa and NOV Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.