Correlation Between COVIVIO HOTELS and China Overseas

Can any of the company-specific risk be diversified away by investing in both COVIVIO HOTELS and China Overseas 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 COVIVIO HOTELS and China Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COVIVIO HOTELS INH and China Overseas Land, you can compare the effects of market volatilities on COVIVIO HOTELS and China Overseas 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 COVIVIO HOTELS with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of COVIVIO HOTELS and China Overseas.

Diversification Opportunities for COVIVIO HOTELS and China Overseas

-0.59

Correlation Coefficient

COVIVIO HOTELS  China Overseas

Excellent diversification

The 3 months correlation between COVIVIO and China is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding COVIVIO HOTELS INH and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and COVIVIO HOTELS 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 COVIVIO HOTELS INH are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of COVIVIO HOTELS i.e., COVIVIO HOTELS and China Overseas go up and down completely randomly.

Pair Corralation between COVIVIO HOTELS and China Overseas

Assuming the 90 days horizon COVIVIO HOTELS is expected to generate 2.21 times less return on investment than China Overseas. But when comparing it to its historical volatility, COVIVIO HOTELS INH is 2.72 times less risky than China Overseas. It trades about 0.05 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  91.00  in China Overseas Land on October 23, 2024 and sell it today you would earn a total of  62.00  from holding China Overseas Land or generate 68.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

COVIVIO HOTELS INH  vs.  China Overseas Land

COVIVIO HOTELS INH

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COVIVIO HOTELS INH are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COVIVIO HOTELS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Overseas Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with COVIVIO HOTELS and China Overseas

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

The idea behind COVIVIO HOTELS INH and China Overseas Land 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.