Correlation Between Air France and Les Hotels
Can any of the company-specific risk be diversified away by investing in both Air France and Les Hotels 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 Air France and Les Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM SA and Les Hotels Bav, you can compare the effects of market volatilities on Air France and Les Hotels 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 Air France with a short position of Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Les Hotels.
Diversification Opportunities for Air France and Les Hotels
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Les is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav and Air France 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 Air France KLM SA are associated (or correlated) with Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of Air France i.e., Air France and Les Hotels go up and down completely randomly.
Pair Corralation between Air France and Les Hotels
Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Les Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Air France KLM SA is 1.59 times less risky than Les Hotels. The stock trades about -0.19 of its potential returns per unit of risk. The Les Hotels Bav is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,150 in Les Hotels Bav on October 26, 2024 and sell it today you would earn a total of 250.00 from holding Les Hotels Bav or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM SA vs. Les Hotels Bav
Performance |
| Timeline |
| Air France KLM |
| Les Hotels Bav |
Air France and Les Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France and Les Hotels
The main advantage of trading using opposite Air France and Les Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France position performs unexpectedly, Les Hotels 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 Les Hotels will offset losses from the drop in Les Hotels' long position.| Air France vs. Diagnostic Medical Systems | Air France vs. Media 6 SA | Air France vs. Les Hotels Bav | Air France vs. Hoteles Bestprice SA |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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