Correlation Between NH HOTEL and China Merchants
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and China Merchants 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 China Merchants 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 China Merchants Bank, you can compare the effects of market volatilities on NH HOTEL and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and China Merchants.
Diversification Opportunities for NH HOTEL and China Merchants
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NH5 and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of NH HOTEL i.e., NH HOTEL and China Merchants go up and down completely randomly.
Pair Corralation between NH HOTEL and China Merchants
Assuming the 90 days trading horizon NH HOTEL GROUP is expected to generate 1.76 times more return on investment than China Merchants. However, NH HOTEL is 1.76 times more volatile than China Merchants Bank. It trades about 0.14 of its potential returns per unit of risk. China Merchants Bank is currently generating about 0.03 per unit of risk. If you would invest 407.00 in NH HOTEL GROUP on November 1, 2024 and sell it today you would earn a total of 222.00 from holding NH HOTEL GROUP or generate 54.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH HOTEL GROUP vs. China Merchants Bank
Performance |
| Timeline |
| NH HOTEL GROUP |
| China Merchants Bank |
NH HOTEL and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and China Merchants
The main advantage of trading using opposite NH HOTEL and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| NH HOTEL vs. COMPUTERSHARE | NH HOTEL vs. Nomad Foods | NH HOTEL vs. Entravision Communications | NH HOTEL vs. Charter Communications |
| China Merchants vs. PT Bank Central | China Merchants vs. DBS Group Holdings | China Merchants vs. State Bank of | China Merchants vs. PT Bank Rakyat |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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