Correlation Between NH HOTEL and MHP Hotel

Can any of the company-specific risk be diversified away by investing in both NH HOTEL 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 NH HOTEL and MHP Hotel 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 MHP Hotel AG, you can compare the effects of market volatilities on NH HOTEL 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 NH HOTEL with a short position of MHP Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and MHP Hotel.

Diversification Opportunities for NH HOTEL and MHP Hotel

0.34

Correlation Coefficient

NH HOTEL  MHP Hotel

Weak diversification

The 3 months correlation between NH5 and MHP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP 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 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 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 NH HOTEL i.e., NH HOTEL and MHP Hotel go up and down completely randomly.

Pair Corralation between NH HOTEL and MHP Hotel

Assuming the 90 days trading horizon NH HOTEL is expected to generate 18.56 times less return on investment than MHP Hotel. But when comparing it to its historical volatility, NH HOTEL GROUP is 3.25 times less risky than MHP Hotel. It trades about 0.02 of its potential returns per unit of risk. MHP Hotel AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  120.00  in MHP Hotel AG on December 20, 2024 and sell it today you would earn a total of  18.00  from holding MHP Hotel AG or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

NH HOTEL GROUP  vs.  MHP Hotel AG

NH HOTEL GROUP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NH HOTEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

MHP Hotel AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, MHP Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NH HOTEL and MHP Hotel

The main advantage of trading using opposite NH HOTEL and MHP Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL 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 NH HOTEL GROUP 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .