Correlation Between NH HOTEL and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and JAPAN TOBACCO 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 JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on NH HOTEL and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and JAPAN TOBACCO.
Diversification Opportunities for NH HOTEL and JAPAN TOBACCO
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NH5 and JAPAN is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of NH HOTEL i.e., NH HOTEL and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between NH HOTEL and JAPAN TOBACCO
Assuming the 90 days trading horizon NH HOTEL is expected to generate 14.72 times less return on investment than JAPAN TOBACCO. In addition to that, NH HOTEL is 1.75 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.01 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.15 per unit of volatility. If you would invest 1,210 in JAPAN TOBACCO UNSPADR12 on September 1, 2024 and sell it today you would earn a total of 60.00 from holding JAPAN TOBACCO UNSPADR12 or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH HOTEL GROUP vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| NH HOTEL GROUP |
| JAPAN TOBACCO UNSPADR12 |
NH HOTEL and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and JAPAN TOBACCO
The main advantage of trading using opposite NH HOTEL and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| NH HOTEL vs. SIVERS SEMICONDUCTORS AB | NH HOTEL vs. Darden Restaurants | NH HOTEL vs. Reliance Steel Aluminum | NH HOTEL vs. Q2M Managementberatung AG |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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