Correlation Between Quaker Chemical and MHP Hotel

Can any of the company-specific risk be diversified away by investing in both Quaker Chemical 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 Quaker Chemical and MHP Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quaker Chemical and MHP Hotel AG, you can compare the effects of market volatilities on Quaker Chemical 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 Quaker Chemical with a short position of MHP Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quaker Chemical and MHP Hotel.

Diversification Opportunities for Quaker Chemical and MHP Hotel

0.02

Correlation Coefficient

Quaker Chemical  MHP Hotel

Significant diversification

The 3 months correlation between Quaker and MHP is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and MHP Hotel go up and down completely randomly.

Pair Corralation between Quaker Chemical and MHP Hotel

Assuming the 90 days horizon Quaker Chemical is expected to generate 11.03 times less return on investment than MHP Hotel. But when comparing it to its historical volatility, Quaker Chemical is 1.33 times less risky than MHP Hotel. It trades about 0.0 of its potential returns per unit of risk. MHP Hotel AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  110.00  in MHP Hotel AG on August 31, 2024 and sell it today you would earn a total of  6.00  from holding MHP Hotel AG or generate 5.45% return on investment over 90 days.

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

Quaker Chemical  vs.  MHP Hotel AG

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Quaker Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MHP Hotel AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Quaker Chemical and MHP Hotel

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

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.