Correlation Between NH HOTEL and Bridgestone

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

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

Diversification Opportunities for NH HOTEL and Bridgestone

-0.39

Correlation Coefficient

NH HOTEL  Bridgestone

Very good diversification

The 3 months correlation between NH5 and Bridgestone is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone and NH HOTEL 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 NH HOTEL GROUP are associated (or correlated) with Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of NH HOTEL i.e., NH HOTEL and Bridgestone go up and down completely randomly.

Pair Corralation between NH HOTEL and Bridgestone

Assuming the 90 days trading horizon NH HOTEL GROUP is expected to generate 5.55 times more return on investment than Bridgestone. However, NH HOTEL is 5.55 times more volatile than Bridgestone. It trades about 0.27 of its potential returns per unit of risk. Bridgestone is currently generating about -0.05 per unit of risk. If you would invest  442.00  in NH HOTEL GROUP on October 10, 2024 and sell it today you would earn a total of  178.00  from holding NH HOTEL GROUP or generate 40.27% return on investment over 90 days.

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

NH HOTEL GROUP  vs.  Bridgestone

NH HOTEL GROUP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NH HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NH HOTEL and Bridgestone

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

The idea behind NH HOTEL GROUP and Bridgestone 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.