Correlation Between NH Hoteles and Soltec Power

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

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

Diversification Opportunities for NH Hoteles and Soltec Power

-0.71

Correlation Coefficient

NH Hoteles  Soltec Power

Pay attention - limited upside

The 3 months correlation between NHH and Soltec is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NH Hoteles and Soltec Power Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soltec Power Holdings and NH Hoteles 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 Hoteles are associated (or correlated) with Soltec Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soltec Power Holdings has no effect on the direction of NH Hoteles i.e., NH Hoteles and Soltec Power go up and down completely randomly.

Pair Corralation between NH Hoteles and Soltec Power

Assuming the 90 days trading horizon NH Hoteles is expected to generate 0.83 times more return on investment than Soltec Power. However, NH Hoteles is 1.2 times less risky than Soltec Power. It trades about 0.12 of its potential returns per unit of risk. Soltec Power Holdings is currently generating about -0.18 per unit of risk. If you would invest  406.00  in NH Hoteles on September 13, 2024 and sell it today you would earn a total of  43.00  from holding NH Hoteles or generate 10.59% return on investment over 90 days.

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

NH Hoteles  vs.  Soltec Power Holdings

NH Hoteles

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NH Hoteles are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, NH Hoteles may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Soltec Power Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soltec Power Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential 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 NH Hoteles and Soltec Power

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

The idea behind NH Hoteles and Soltec Power 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.