Correlation Between CITY OFFICE and NH HOTEL

Can any of the company-specific risk be diversified away by investing in both CITY OFFICE 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 CITY OFFICE and NH HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CITY OFFICE REIT and NH HOTEL GROUP, you can compare the effects of market volatilities on CITY OFFICE 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 CITY OFFICE with a short position of NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and NH HOTEL.

Diversification Opportunities for CITY OFFICE and NH HOTEL

-0.18

Correlation Coefficient

CITY OFFICE  NH HOTEL

Good diversification

The 3 months correlation between CITY and NH5 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT 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 CITY OFFICE 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 CITY OFFICE REIT 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 CITY OFFICE i.e., CITY OFFICE and NH HOTEL go up and down completely randomly.

Pair Corralation between CITY OFFICE and NH HOTEL

Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 1.15 times more return on investment than NH HOTEL. However, CITY OFFICE is 1.15 times more volatile than NH HOTEL GROUP. It trades about 0.28 of its potential returns per unit of risk. NH HOTEL GROUP is currently generating about 0.05 per unit of risk. If you would invest  438.00  in CITY OFFICE REIT on September 5, 2024 and sell it today you would earn a total of  97.00  from holding CITY OFFICE REIT or generate 22.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

CITY OFFICE REIT  vs.  NH HOTEL GROUP

CITY OFFICE REIT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE reported solid returns over the last few months and may actually be approaching a breakup point.

NH HOTEL GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NH HOTEL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CITY OFFICE and NH HOTEL

The main advantage of trading using opposite CITY OFFICE and NH HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE 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.

The idea behind CITY OFFICE REIT and NH HOTEL 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.