Correlation Between Rocket Internet and COVIVIO HOTELS
Can any of the company-specific risk be diversified away by investing in both Rocket Internet and COVIVIO 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 Rocket Internet and COVIVIO HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Internet SE and COVIVIO HOTELS INH, you can compare the effects of market volatilities on Rocket Internet and COVIVIO 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 Rocket Internet with a short position of COVIVIO HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and COVIVIO HOTELS.
Diversification Opportunities for Rocket Internet and COVIVIO HOTELS
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rocket and COVIVIO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and COVIVIO HOTELS INH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVIVIO HOTELS INH and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with COVIVIO HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVIVIO HOTELS INH has no effect on the direction of Rocket Internet i.e., Rocket Internet and COVIVIO HOTELS go up and down completely randomly.
Pair Corralation between Rocket Internet and COVIVIO HOTELS
Assuming the 90 days trading horizon Rocket Internet is expected to generate 3.21 times less return on investment than COVIVIO HOTELS. In addition to that, Rocket Internet is 1.06 times more volatile than COVIVIO HOTELS INH. It trades about 0.08 of its total potential returns per unit of risk. COVIVIO HOTELS INH is currently generating about 0.28 per unit of volatility. If you would invest 1,815 in COVIVIO HOTELS INH on October 12, 2024 and sell it today you would earn a total of 185.00 from holding COVIVIO HOTELS INH or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Internet SE vs. COVIVIO HOTELS INH
Performance |
| Timeline |
| Rocket Internet SE |
| COVIVIO HOTELS INH |
Rocket Internet and COVIVIO HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Internet and COVIVIO HOTELS
The main advantage of trading using opposite Rocket Internet and COVIVIO HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet position performs unexpectedly, COVIVIO 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 COVIVIO HOTELS will offset losses from the drop in COVIVIO HOTELS's long position.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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