Correlation Between NH HOTEL and Charter Communications

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

Diversification Opportunities for NH HOTEL and Charter Communications

-0.86

Correlation Coefficient

NH HOTEL  Charter Communications

Pay attention - limited upside

The 3 months correlation between NH5 and Charter is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of NH HOTEL i.e., NH HOTEL and Charter Communications go up and down completely randomly.

Pair Corralation between NH HOTEL and Charter Communications

Assuming the 90 days trading horizon NH HOTEL GROUP is expected to generate 2.32 times more return on investment than Charter Communications. However, NH HOTEL is 2.32 times more volatile than Charter Communications. It trades about 0.16 of its potential returns per unit of risk. Charter Communications is currently generating about -0.06 per unit of risk. If you would invest  432.00  in NH HOTEL GROUP on December 2, 2024 and sell it today you would earn a total of  197.00  from holding NH HOTEL GROUP or generate 45.6% return on investment over 90 days.

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

NH HOTEL GROUP  vs.  Charter Communications

NH HOTEL GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NH HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Charter Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NH HOTEL and Charter Communications

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

The idea behind NH HOTEL GROUP and Charter Communications 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.