Correlation Between NH Hoteles and Tecnicas Reunidas

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

By analyzing existing cross correlation between NH Hoteles and Tecnicas Reunidas, you can compare the effects of market volatilities on NH Hoteles and Tecnicas Reunidas 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 Tecnicas Reunidas. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Hoteles and Tecnicas Reunidas.

Diversification Opportunities for NH Hoteles and Tecnicas Reunidas

0.24

Correlation Coefficient

NH Hoteles  Tecnicas Reunidas

Modest diversification

The 3 months correlation between NHH and Tecnicas is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NH Hoteles and Tecnicas Reunidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnicas Reunidas 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 Tecnicas Reunidas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnicas Reunidas has no effect on the direction of NH Hoteles i.e., NH Hoteles and Tecnicas Reunidas go up and down completely randomly.

Pair Corralation between NH Hoteles and Tecnicas Reunidas

Assuming the 90 days trading horizon NH Hoteles is expected to generate 1.71 times more return on investment than Tecnicas Reunidas. However, NH Hoteles is 1.71 times more volatile than Tecnicas Reunidas. It trades about 0.14 of its potential returns per unit of risk. Tecnicas Reunidas is currently generating about 0.06 per unit of risk. If you would invest  450.00  in NH Hoteles on October 12, 2024 and sell it today you would earn a total of  178.00  from holding NH Hoteles or generate 39.56% return on investment over 90 days.

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

NH Hoteles  vs.  Tecnicas Reunidas

NH Hoteles

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NH Hoteles are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, NH Hoteles exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tecnicas Reunidas

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnicas Reunidas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tecnicas Reunidas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NH Hoteles and Tecnicas Reunidas

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

The idea behind NH Hoteles and Tecnicas Reunidas 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.