Correlation Between NH HOTEL and Ribbon Communications
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and Ribbon Communications 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 Ribbon Communications 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 Ribbon Communications, you can compare the effects of market volatilities on NH HOTEL and Ribbon Communications 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 Ribbon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and Ribbon Communications.
Diversification Opportunities for NH HOTEL and Ribbon Communications
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NH5 and Ribbon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications 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 Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of NH HOTEL i.e., NH HOTEL and Ribbon Communications go up and down completely randomly.
Pair Corralation between NH HOTEL and Ribbon Communications
Assuming the 90 days trading horizon NH HOTEL is expected to generate 4.18 times less return on investment than Ribbon Communications. But when comparing it to its historical volatility, NH HOTEL GROUP is 1.29 times less risky than Ribbon Communications. It trades about 0.02 of its potential returns per unit of risk. Ribbon Communications is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 284.00 in Ribbon Communications on September 1, 2024 and sell it today you would earn a total of 64.00 from holding Ribbon Communications or generate 22.54% 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. Ribbon Communications
Performance |
| Timeline |
| NH HOTEL GROUP |
| Ribbon Communications |
NH HOTEL and Ribbon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and Ribbon Communications
The main advantage of trading using opposite NH HOTEL and Ribbon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, Ribbon Communications 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 Ribbon Communications will offset losses from the drop in Ribbon Communications' 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 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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