Correlation Between Home Capital and NH Hoteles

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

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

Diversification Opportunities for Home Capital and NH Hoteles

-0.16

Correlation Coefficient

Home Capital  NH Hoteles

Good diversification

The 3 months correlation between Home and NHH is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and NH Hoteles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Hoteles and Home Capital 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 Home Capital Rentals are associated (or correlated) with NH Hoteles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Hoteles has no effect on the direction of Home Capital i.e., Home Capital and NH Hoteles go up and down completely randomly.

Pair Corralation between Home Capital and NH Hoteles

If you would invest  629.00  in NH Hoteles on December 28, 2024 and sell it today you would earn a total of  3.00  from holding NH Hoteles or generate 0.48% return on investment over 90 days.

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

Home Capital Rentals  vs.  NH Hoteles

Home Capital Rentals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Capital Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NH Hoteles

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NH Hoteles are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, NH Hoteles is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Home Capital and NH Hoteles

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

The idea behind Home Capital Rentals and NH Hoteles 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.