Correlation Between Hilton Worldwide and DNB BANK

Can any of the company-specific risk be diversified away by investing in both Hilton Worldwide and DNB BANK 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 Hilton Worldwide and DNB BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hilton Worldwide Holdings and DNB BANK ASA, you can compare the effects of market volatilities on Hilton Worldwide and DNB BANK 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 Hilton Worldwide with a short position of DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Worldwide and DNB BANK.

Diversification Opportunities for Hilton Worldwide and DNB BANK

0.82

Correlation Coefficient

Hilton Worldwide  DNB BANK

Very poor diversification

The 3 months correlation between Hilton and DNB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA and Hilton Worldwide 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 Hilton Worldwide Holdings are associated (or correlated) with DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and DNB BANK go up and down completely randomly.

Pair Corralation between Hilton Worldwide and DNB BANK

Assuming the 90 days trading horizon Hilton Worldwide Holdings is expected to generate 0.61 times more return on investment than DNB BANK. However, Hilton Worldwide Holdings is 1.63 times less risky than DNB BANK. It trades about 0.2 of its potential returns per unit of risk. DNB BANK ASA is currently generating about 0.03 per unit of risk. If you would invest  20,018  in Hilton Worldwide Holdings on September 23, 2024 and sell it today you would earn a total of  3,462  from holding Hilton Worldwide Holdings or generate 17.29% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  DNB BANK ASA

Hilton Worldwide Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hilton Worldwide reported solid returns over the last few months and may actually be approaching a breakup point.

DNB BANK ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DNB BANK ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DNB BANK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hilton Worldwide and DNB BANK

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

The idea behind Hilton Worldwide Holdings and DNB BANK ASA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.