Correlation Between GM and NH Hotel
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and NH Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and NH Hotel Group, you can compare the effects of market volatilities on GM 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 GM with a short position of NH Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and NH Hotel.
Diversification Opportunities for GM and NH Hotel
Very good diversification
The 3 months correlation between GM and NHHEF is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and NH Hotel go up and down completely randomly.
Pair Corralation between GM and NH Hotel
If you would invest 5,034 in General Motors on October 20, 2024 and sell it today you would earn a total of 63.00 from holding General Motors or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
General Motors vs. NH Hotel Group
Performance |
| Timeline |
| General Motors |
| NH Hotel Group |
GM and NH Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and NH Hotel
The main advantage of trading using opposite GM and NH Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| NH Hotel vs. Universal Electronics | NH Hotel vs. VOXX International | NH Hotel vs. Sony Group Corp | NH Hotel vs. TCL Electronics Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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