Correlation Between MHP Hotel and Sun Art

Can any of the company-specific risk be diversified away by investing in both MHP Hotel and Sun Art 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 Sun Art 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 Sun Art Retail, you can compare the effects of market volatilities on MHP Hotel and Sun Art 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 Sun Art. Check out your portfolio center. Please also check ongoing floating volatility patterns of MHP Hotel and Sun Art.

Diversification Opportunities for MHP Hotel and Sun Art

0.25

Correlation Coefficient

MHP Hotel  Sun Art

Modest diversification

The 3 months correlation between MHP and Sun is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and Sun Art Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Art Retail 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 Sun Art. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Art Retail has no effect on the direction of MHP Hotel i.e., MHP Hotel and Sun Art go up and down completely randomly.

Pair Corralation between MHP Hotel and Sun Art

Assuming the 90 days trading horizon MHP Hotel is expected to generate 17.97 times less return on investment than Sun Art. But when comparing it to its historical volatility, MHP Hotel AG is 4.83 times less risky than Sun Art. It trades about 0.05 of its potential returns per unit of risk. Sun Art Retail is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8.68  in Sun Art Retail on September 26, 2024 and sell it today you would earn a total of  19.32  from holding Sun Art Retail or generate 222.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MHP Hotel AG  vs.  Sun Art Retail

MHP Hotel AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sun Art Retail

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Art Retail are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sun Art unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MHP Hotel and Sun Art

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

The idea behind MHP Hotel AG and Sun Art Retail 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.