Correlation Between NH HOTEL and Air Transport
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and Air Transport 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 NH HOTEL and Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NH HOTEL GROUP and Air Transport Services, you can compare the effects of market volatilities on NH HOTEL and Air Transport 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 NH HOTEL with a short position of Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and Air Transport.
Diversification Opportunities for NH HOTEL and Air Transport
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NH5 and Air is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services and NH HOTEL 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 NH HOTEL GROUP are associated (or correlated) with Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of NH HOTEL i.e., NH HOTEL and Air Transport go up and down completely randomly.
Pair Corralation between NH HOTEL and Air Transport
Assuming the 90 days trading horizon NH HOTEL is expected to generate 5.69 times less return on investment than Air Transport. But when comparing it to its historical volatility, NH HOTEL GROUP is 1.22 times less risky than Air Transport. It trades about 0.03 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,210 in Air Transport Services on September 3, 2024 and sell it today you would earn a total of 870.00 from holding Air Transport Services or generate 71.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH HOTEL GROUP vs. Air Transport Services
Performance |
| Timeline |
| NH HOTEL GROUP |
| Air Transport Services |
NH HOTEL and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and Air Transport
The main advantage of trading using opposite NH HOTEL and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.The idea behind NH HOTEL GROUP and Air Transport Services 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.| Air Transport vs. Computershare Limited | Air Transport vs. Ribbon Communications | Air Transport vs. Axcelis Technologies | Air Transport vs. Playtech plc |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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