Correlation Between Corporate Office and NH HOTEL

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

By analyzing existing cross correlation between Corporate Office Properties and NH HOTEL GROUP, you can compare the effects of market volatilities on Corporate Office and NH 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 Corporate Office with a short position of NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and NH HOTEL.

Diversification Opportunities for Corporate Office and NH HOTEL

0.25

Correlation Coefficient

Corporate Office  NH HOTEL

Modest diversification

The 3 months correlation between Corporate and NH5 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and NH HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH HOTEL GROUP and Corporate Office 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 Corporate Office Properties are associated (or correlated) with NH HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH HOTEL GROUP has no effect on the direction of Corporate Office i.e., Corporate Office and NH HOTEL go up and down completely randomly.

Pair Corralation between Corporate Office and NH HOTEL

Assuming the 90 days horizon Corporate Office is expected to generate 1.75 times less return on investment than NH HOTEL. But when comparing it to its historical volatility, Corporate Office Properties is 2.62 times less risky than NH HOTEL. It trades about 0.09 of its potential returns per unit of risk. NH HOTEL GROUP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  395.00  in NH HOTEL GROUP on September 26, 2024 and sell it today you would earn a total of  228.00  from holding NH HOTEL GROUP or generate 57.72% return on investment over 90 days.

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

Corporate Office Properties  vs.  NH HOTEL GROUP

Corporate Office Pro

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corporate Office may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NH HOTEL GROUP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 13 (%) 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.

Pair Trading with Corporate Office and NH HOTEL

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

The idea behind Corporate Office Properties and NH HOTEL GROUP 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.