Correlation Between Huazhu and Mondee Holdings

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

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

Diversification Opportunities for Huazhu and Mondee Holdings

-0.05

Correlation Coefficient

Huazhu  Mondee Holdings

Good diversification

The 3 months correlation between Huazhu and Mondee is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Huazhu Group and Mondee Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondee Holdings and Huazhu 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 Huazhu Group are associated (or correlated) with Mondee Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondee Holdings has no effect on the direction of Huazhu i.e., Huazhu and Mondee Holdings go up and down completely randomly.

Pair Corralation between Huazhu and Mondee Holdings

Given the investment horizon of 90 days Huazhu Group is expected to generate 0.14 times more return on investment than Mondee Holdings. However, Huazhu Group is 6.92 times less risky than Mondee Holdings. It trades about -0.09 of its potential returns per unit of risk. Mondee Holdings is currently generating about -0.64 per unit of risk. If you would invest  3,581  in Huazhu Group on September 16, 2024 and sell it today you would lose (278.00) from holding Huazhu Group or give up 7.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

Huazhu Group  vs.  Mondee Holdings

Huazhu Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huazhu Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Huazhu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mondee Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondee Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Huazhu and Mondee Holdings

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

The idea behind Huazhu Group and Mondee Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.