Correlation Between Compania Hoteliera and Digi Communications
Can any of the company-specific risk be diversified away by investing in both Compania Hoteliera and Digi Communications 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 Compania Hoteliera and Digi Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania Hoteliera InterContinental and Digi Communications NV, you can compare the effects of market volatilities on Compania Hoteliera and Digi Communications 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 Compania Hoteliera with a short position of Digi Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Hoteliera and Digi Communications.
Diversification Opportunities for Compania Hoteliera and Digi Communications
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Compania and Digi is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Compania Hoteliera InterContin and Digi Communications NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi Communications and Compania Hoteliera 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 Compania Hoteliera InterContinental are associated (or correlated) with Digi Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi Communications has no effect on the direction of Compania Hoteliera i.e., Compania Hoteliera and Digi Communications go up and down completely randomly.
Pair Corralation between Compania Hoteliera and Digi Communications
Assuming the 90 days trading horizon Compania Hoteliera InterContinental is expected to generate 1.8 times more return on investment than Digi Communications. However, Compania Hoteliera is 1.8 times more volatile than Digi Communications NV. It trades about 0.22 of its potential returns per unit of risk. Digi Communications NV is currently generating about -0.08 per unit of risk. If you would invest 22.00 in Compania Hoteliera InterContinental on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Compania Hoteliera InterContinental or generate 9.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Compania Hoteliera InterContin vs. Digi Communications NV
Performance |
Timeline |
Compania Hoteliera |
Digi Communications |
Compania Hoteliera and Digi Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Compania Hoteliera and Digi Communications
The main advantage of trading using opposite Compania Hoteliera and Digi Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Hoteliera position performs unexpectedly, Digi Communications 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 Digi Communications will offset losses from the drop in Digi Communications' long position.Compania Hoteliera vs. Teraplast Bist | Compania Hoteliera vs. IAR SA | Compania Hoteliera vs. Cemacon Zalau |
Digi Communications vs. Teraplast Bist | Digi Communications vs. IAR SA | Digi Communications vs. Cemacon Zalau |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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