Correlation Between NH HOTEL and TOTAL GABON
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and TOTAL GABON 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 TOTAL GABON 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 TOTAL GABON, you can compare the effects of market volatilities on NH HOTEL and TOTAL GABON 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 TOTAL GABON. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and TOTAL GABON.
Diversification Opportunities for NH HOTEL and TOTAL GABON
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NH5 and TOTAL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and TOTAL GABON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL GABON 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 TOTAL GABON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL GABON has no effect on the direction of NH HOTEL i.e., NH HOTEL and TOTAL GABON go up and down completely randomly.
Pair Corralation between NH HOTEL and TOTAL GABON
Assuming the 90 days trading horizon NH HOTEL is expected to generate 1.33 times less return on investment than TOTAL GABON. In addition to that, NH HOTEL is 1.74 times more volatile than TOTAL GABON. It trades about 0.03 of its total potential returns per unit of risk. TOTAL GABON is currently generating about 0.06 per unit of volatility. If you would invest 14,089 in TOTAL GABON on September 4, 2024 and sell it today you would earn a total of 4,261 from holding TOTAL GABON or generate 30.24% 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. TOTAL GABON
Performance |
| Timeline |
| NH HOTEL GROUP |
| TOTAL GABON |
NH HOTEL and TOTAL GABON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and TOTAL GABON
The main advantage of trading using opposite NH HOTEL and TOTAL GABON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, TOTAL GABON 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 TOTAL GABON will offset losses from the drop in TOTAL GABON's long position.The idea behind NH HOTEL GROUP and TOTAL GABON 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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