Correlation Between Hyatt Hotels and Huazhu

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

By analyzing existing cross correlation between Hyatt Hotels and Huazhu Group, you can compare the effects of market volatilities on Hyatt Hotels and Huazhu 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 Hyatt Hotels with a short position of Huazhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyatt Hotels and Huazhu.

Diversification Opportunities for Hyatt Hotels and Huazhu

0.79

Correlation Coefficient

Hyatt Hotels  Huazhu

Poor diversification

The 3 months correlation between Hyatt and Huazhu is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hyatt Hotels and Huazhu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huazhu Group and Hyatt Hotels 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 Hyatt Hotels are associated (or correlated) with Huazhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huazhu Group has no effect on the direction of Hyatt Hotels i.e., Hyatt Hotels and Huazhu go up and down completely randomly.

Pair Corralation between Hyatt Hotels and Huazhu

Taking into account the 90-day investment horizon Hyatt Hotels is expected to generate 0.71 times more return on investment than Huazhu. However, Hyatt Hotels is 1.41 times less risky than Huazhu. It trades about 0.07 of its potential returns per unit of risk. Huazhu Group is currently generating about -0.01 per unit of risk. If you would invest  11,491  in Hyatt Hotels on January 26, 2024 and sell it today you would earn a total of  3,692  from holding Hyatt Hotels or generate 32.13% return on investment over 90 days.

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

Hyatt Hotels  vs.  Huazhu Group

Hyatt Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hyatt Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Hyatt Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Huazhu Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huazhu Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Huazhu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyatt Hotels and Huazhu

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

The idea behind Hyatt Hotels and Huazhu 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.