Correlation Between WPP PLC and NH HOTEL
Can any of the company-specific risk be diversified away by investing in both WPP PLC 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 WPP PLC and NH HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WPP PLC and NH HOTEL GROUP, you can compare the effects of market volatilities on WPP PLC 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 WPP PLC with a short position of NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and NH HOTEL.
Diversification Opportunities for WPP PLC and NH HOTEL
Excellent diversification
The 3 months correlation between WPP and NH5 is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC 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 WPP PLC 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 WPP PLC 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 WPP PLC i.e., WPP PLC and NH HOTEL go up and down completely randomly.
Pair Corralation between WPP PLC and NH HOTEL
Assuming the 90 days trading horizon WPP PLC is expected to under-perform the NH HOTEL. In addition to that, WPP PLC is 3.44 times more volatile than NH HOTEL GROUP. It trades about -0.28 of its total potential returns per unit of risk. NH HOTEL GROUP is currently generating about 0.01 per unit of volatility. If you would invest 627.00 in NH HOTEL GROUP on December 6, 2024 and sell it today you would earn a total of 1.00 from holding NH HOTEL GROUP or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WPP PLC vs. NH HOTEL GROUP
Performance |
| Timeline |
| WPP PLC |
| NH HOTEL GROUP |
WPP PLC and NH HOTEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WPP PLC and NH HOTEL
The main advantage of trading using opposite WPP PLC and NH HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPP PLC 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.| WPP PLC vs. 24SEVENOFFICE GROUP AB | ||
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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