Correlation Between NH HOTEL and Performance Food
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and Performance Food 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 Performance Food 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 Performance Food Group, you can compare the effects of market volatilities on NH HOTEL and Performance Food 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 Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and Performance Food.
Diversification Opportunities for NH HOTEL and Performance Food
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NH5 and Performance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of NH HOTEL i.e., NH HOTEL and Performance Food go up and down completely randomly.
Pair Corralation between NH HOTEL and Performance Food
Assuming the 90 days trading horizon NH HOTEL GROUP is expected to under-perform the Performance Food. But the stock apears to be less risky and, when comparing its historical volatility, NH HOTEL GROUP is 1.83 times less risky than Performance Food. The stock trades about -0.02 of its potential returns per unit of risk. The Performance Food Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 8,150 in Performance Food Group on October 25, 2024 and sell it today you would earn a total of 300.00 from holding Performance Food Group or generate 3.68% 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. Performance Food Group
Performance |
| Timeline |
| NH HOTEL GROUP |
| Performance Food |
NH HOTEL and Performance Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and Performance Food
The main advantage of trading using opposite NH HOTEL and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, Performance Food 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 Performance Food will offset losses from the drop in Performance Food's long position.The idea behind NH HOTEL GROUP and Performance Food Group 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.| Performance Food vs. Meiko Electronics Co | Performance Food vs. HYATT HOTELS A | Performance Food vs. PPHE HOTEL GROUP | Performance Food vs. NH HOTEL GROUP |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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