Correlation Between NORTHEAST UTILITIES and NH HOTEL
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and NH HOTEL 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 NORTHEAST UTILITIES and NH HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and NH HOTEL GROUP, you can compare the effects of market volatilities on NORTHEAST UTILITIES and NH HOTEL 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 NORTHEAST UTILITIES with a short position of NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and NH HOTEL.
Diversification Opportunities for NORTHEAST UTILITIES and NH HOTEL
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NORTHEAST and NH5 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and NH HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH HOTEL GROUP and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with NH HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH HOTEL GROUP has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and NH HOTEL go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and NH HOTEL
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 1.88 times more return on investment than NH HOTEL. However, NORTHEAST UTILITIES is 1.88 times more volatile than NH HOTEL GROUP. It trades about 0.25 of its potential returns per unit of risk. NH HOTEL GROUP is currently generating about 0.01 per unit of risk. If you would invest 5,550 in NORTHEAST UTILITIES on November 29, 2024 and sell it today you would earn a total of 500.00 from holding NORTHEAST UTILITIES or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. NH HOTEL GROUP
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| NH HOTEL GROUP |
NORTHEAST UTILITIES and NH HOTEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and NH HOTEL
The main advantage of trading using opposite NORTHEAST UTILITIES and NH HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, NH HOTEL 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 NH HOTEL will offset losses from the drop in NH HOTEL's long position.| NORTHEAST UTILITIES vs. LAir Liquide SA | NORTHEAST UTILITIES vs. Ryanair Holdings plc | NORTHEAST UTILITIES vs. RYANAIR HLDGS ADR | NORTHEAST UTILITIES vs. ALTAIR RES INC |
| NH HOTEL vs. Easy Software AG | NH HOTEL vs. Keck Seng Investments | NH HOTEL vs. VITEC SOFTWARE GROUP | NH HOTEL vs. USU Software 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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