Correlation Between Axfood AB and PPHE Hotel

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

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

Diversification Opportunities for Axfood AB and PPHE Hotel

-0.36

Correlation Coefficient

Axfood AB  PPHE Hotel

Very good diversification

The 3 months correlation between Axfood and PPHE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group and Axfood AB 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 Axfood AB are associated (or correlated) with PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of Axfood AB i.e., Axfood AB and PPHE Hotel go up and down completely randomly.

Pair Corralation between Axfood AB and PPHE Hotel

Assuming the 90 days trading horizon Axfood AB is expected to under-perform the PPHE Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Axfood AB is 1.92 times less risky than PPHE Hotel. The stock trades about -0.02 of its potential returns per unit of risk. The PPHE Hotel Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  118,500  in PPHE Hotel Group on October 25, 2024 and sell it today you would earn a total of  6,000  from holding PPHE Hotel Group or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Axfood AB  vs.  PPHE Hotel Group

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Axfood AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PPHE Hotel Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE Hotel Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PPHE Hotel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Axfood AB and PPHE Hotel

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

The idea behind Axfood AB and PPHE Hotel 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.