Correlation Between NH HOTEL and Bank of China Limited
Can any of the company-specific risk be diversified away by investing in both NH HOTEL and Bank of China Limited 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 Bank of China Limited 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 Bank of China, you can compare the effects of market volatilities on NH HOTEL and Bank of China Limited 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 Bank of China Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and Bank of China Limited.
Diversification Opportunities for NH HOTEL and Bank of China Limited
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NH5 and Bank is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China Limited 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 Bank of China Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China Limited has no effect on the direction of NH HOTEL i.e., NH HOTEL and Bank of China Limited go up and down completely randomly.
Pair Corralation between NH HOTEL and Bank of China Limited
Assuming the 90 days trading horizon NH HOTEL is expected to generate 3.24 times less return on investment than Bank of China Limited. But when comparing it to its historical volatility, NH HOTEL GROUP is 2.09 times less risky than Bank of China Limited. It trades about 0.07 of its potential returns per unit of risk. Bank of China is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Bank of China on October 20, 2024 and sell it today you would earn a total of 37.00 from holding Bank of China or generate 336.36% 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. Bank of China
Performance |
| Timeline |
| NH HOTEL GROUP |
| Bank of China Limited |
NH HOTEL and Bank of China Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and Bank of China Limited
The main advantage of trading using opposite NH HOTEL and Bank of China Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL position performs unexpectedly, Bank of China Limited 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 Bank of China Limited will offset losses from the drop in Bank of China Limited's long position.| NH HOTEL vs. CN MODERN DAIRY | NH HOTEL vs. American Airlines Group | NH HOTEL vs. PLANT VEDA FOODS | NH HOTEL vs. EBRO FOODS |
| Bank of China Limited vs. JPMorgan Chase Co | Bank of China Limited vs. Bank of America | Bank of China Limited vs. Wells Fargo | Bank of China Limited vs. China Construction Bank |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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