Correlation Between Groupimo and Les Hotels
Can any of the company-specific risk be diversified away by investing in both Groupimo 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 Groupimo and Les Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Groupimo SA and Les Hotels Bav, you can compare the effects of market volatilities on Groupimo 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 Groupimo with a short position of Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupimo and Les Hotels.
Diversification Opportunities for Groupimo and Les Hotels
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Groupimo and Les is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Groupimo 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 Groupimo 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 Groupimo 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 Groupimo i.e., Groupimo and Les Hotels go up and down completely randomly.
Pair Corralation between Groupimo and Les Hotels
Assuming the 90 days trading horizon Groupimo SA is expected to under-perform the Les Hotels. In addition to that, Groupimo is 4.55 times more volatile than Les Hotels Bav. It trades about 0.0 of its total potential returns per unit of risk. Les Hotels Bav is currently generating about 0.02 per unit of volatility. If you would invest 6,350 in Les Hotels Bav on August 30, 2024 and sell it today you would earn a total of 850.00 from holding Les Hotels Bav or generate 13.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.53% |
| Values | Daily Returns |
Groupimo SA vs. Les Hotels Bav
Performance |
| Timeline |
| Groupimo SA |
| Les Hotels Bav |
Groupimo and Les Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Groupimo and Les Hotels
The main advantage of trading using opposite Groupimo and Les Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupimo 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.The idea behind Groupimo SA and Les Hotels Bav 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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