Correlation Between NH HOTEL and ITALIAN WINE
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and ITALIAN WINE 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 ITALIAN WINE 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 ITALIAN WINE BRANDS, you can compare the effects of market volatilities on NH HOTEL and ITALIAN WINE 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 ITALIAN WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and ITALIAN WINE.
Diversification Opportunities for NH HOTEL and ITALIAN WINE
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NH5 and ITALIAN is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of NH HOTEL i.e., NH HOTEL and ITALIAN WINE go up and down completely randomly.
Pair Corralation between NH HOTEL and ITALIAN WINE
Assuming the 90 days trading horizon NH HOTEL GROUP is expected to generate 1.54 times more return on investment than ITALIAN WINE. However, NH HOTEL is 1.54 times more volatile than ITALIAN WINE BRANDS. It trades about 0.04 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about -0.01 per unit of risk. If you would invest 292.00 in NH HOTEL GROUP on August 28, 2024 and sell it today you would earn a total of 114.00 from holding NH HOTEL GROUP or generate 39.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH HOTEL GROUP vs. ITALIAN WINE BRANDS
Performance |
| Timeline |
| NH HOTEL GROUP |
| ITALIAN WINE BRANDS |
NH HOTEL and ITALIAN WINE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and ITALIAN WINE
The main advantage of trading using opposite NH HOTEL and ITALIAN WINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, ITALIAN WINE 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 ITALIAN WINE will offset losses from the drop in ITALIAN WINE's long position.The idea behind NH HOTEL GROUP and ITALIAN WINE BRANDS 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.| ITALIAN WINE vs. Merit Medical Systems | ITALIAN WINE vs. GOODYEAR T RUBBER | ITALIAN WINE vs. SCANDMEDICAL SOLDK 040 | ITALIAN WINE vs. Apollo Medical 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 CEOs Directory module to screen CEOs from public companies around the world.
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