Correlation Between MHP Hotel and CITY OFFICE

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

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

Diversification Opportunities for MHP Hotel and CITY OFFICE

0.16

Correlation Coefficient

MHP Hotel  CITY OFFICE

Average diversification

The 3 months correlation between MHP and CITY is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT and MHP 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 MHP Hotel AG are associated (or correlated) with CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of MHP Hotel i.e., MHP Hotel and CITY OFFICE go up and down completely randomly.

Pair Corralation between MHP Hotel and CITY OFFICE

Assuming the 90 days trading horizon MHP Hotel is expected to generate 2.05 times less return on investment than CITY OFFICE. In addition to that, MHP Hotel is 1.08 times more volatile than CITY OFFICE REIT. It trades about 0.04 of its total potential returns per unit of risk. CITY OFFICE REIT is currently generating about 0.08 per unit of volatility. If you would invest  476.00  in CITY OFFICE REIT on September 5, 2024 and sell it today you would earn a total of  59.00  from holding CITY OFFICE REIT or generate 12.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

MHP Hotel AG  vs.  CITY OFFICE REIT

MHP Hotel AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with MHP Hotel and CITY OFFICE

The main advantage of trading using opposite MHP Hotel and CITY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MHP Hotel position performs unexpectedly, CITY OFFICE 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 CITY OFFICE will offset losses from the drop in CITY OFFICE's long position.

The idea behind MHP Hotel AG and CITY OFFICE REIT 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.