Correlation Between NH HOTEL and Herms International

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

Diversification Opportunities for NH HOTEL and Herms International

0.6

Correlation Coefficient

NH HOTEL  Herms International

Poor diversification

The 3 months correlation between NH5 and Herms is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit 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 Herms International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of NH HOTEL i.e., NH HOTEL and Herms International go up and down completely randomly.

Pair Corralation between NH HOTEL and Herms International

Assuming the 90 days trading horizon NH HOTEL GROUP is expected to generate 3.87 times more return on investment than Herms International. However, NH HOTEL is 3.87 times more volatile than Herms International Socit. It trades about 0.29 of its potential returns per unit of risk. Herms International Socit is currently generating about 0.31 per unit of risk. If you would invest  412.00  in NH HOTEL GROUP on September 23, 2024 and sell it today you would earn a total of  210.00  from holding NH HOTEL GROUP or generate 50.97% return on investment over 90 days.

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

NH HOTEL GROUP  vs.  Herms International Socit

NH HOTEL GROUP

Risk-Adjusted Performance

12 of 100

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 uncertain basic indicators, NH HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Herms International Socit

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herms International Socit are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Herms International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NH HOTEL and Herms International

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

The idea behind NH HOTEL GROUP and Herms International Socit 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.