Correlation Between Grupo Hotelero and TopBuild Corp
Can any of the company-specific risk be diversified away by investing in both Grupo Hotelero and TopBuild Corp 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 Grupo Hotelero and TopBuild Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Hotelero Santa and TopBuild Corp, you can compare the effects of market volatilities on Grupo Hotelero and TopBuild Corp 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 Grupo Hotelero with a short position of TopBuild Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Hotelero and TopBuild Corp.
Diversification Opportunities for Grupo Hotelero and TopBuild Corp
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Grupo and TopBuild is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and TopBuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TopBuild Corp and Grupo Hotelero 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 Grupo Hotelero Santa are associated (or correlated) with TopBuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TopBuild Corp has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and TopBuild Corp go up and down completely randomly.
Pair Corralation between Grupo Hotelero and TopBuild Corp
Assuming the 90 days trading horizon Grupo Hotelero is expected to generate 16.73 times less return on investment than TopBuild Corp. But when comparing it to its historical volatility, Grupo Hotelero Santa is 2.26 times less risky than TopBuild Corp. It trades about 0.01 of its potential returns per unit of risk. TopBuild Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 427,000 in TopBuild Corp on September 2, 2024 and sell it today you would earn a total of 383,759 from holding TopBuild Corp or generate 89.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Grupo Hotelero Santa vs. TopBuild Corp
Performance |
| Timeline |
| Grupo Hotelero Santa |
| TopBuild Corp |
Grupo Hotelero and TopBuild Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Hotelero and TopBuild Corp
The main advantage of trading using opposite Grupo Hotelero and TopBuild Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero position performs unexpectedly, TopBuild Corp 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 TopBuild Corp will offset losses from the drop in TopBuild Corp's long position.| Grupo Hotelero vs. Capital One Financial | Grupo Hotelero vs. Lloyds Banking Group | Grupo Hotelero vs. McEwen Mining | Grupo Hotelero vs. Verizon Communications |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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