Correlation Between Credit Agricole and Hoteles Bestprice

Can any of the company-specific risk be diversified away by investing in both Credit Agricole and Hoteles Bestprice 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 Credit Agricole and Hoteles Bestprice into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Credit Agricole SA and Hoteles Bestprice SA, you can compare the effects of market volatilities on Credit Agricole and Hoteles Bestprice 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 Credit Agricole with a short position of Hoteles Bestprice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Agricole and Hoteles Bestprice.

Diversification Opportunities for Credit Agricole and Hoteles Bestprice

0.91

Correlation Coefficient

Credit Agricole  Hoteles Bestprice

Almost no diversification

The 3 months correlation between Credit and Hoteles is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Credit Agricole SA and Hoteles Bestprice SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles Bestprice and Credit Agricole 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 Credit Agricole SA are associated (or correlated) with Hoteles Bestprice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles Bestprice has no effect on the direction of Credit Agricole i.e., Credit Agricole and Hoteles Bestprice go up and down completely randomly.

Pair Corralation between Credit Agricole and Hoteles Bestprice

Assuming the 90 days trading horizon Credit Agricole SA is expected to generate 0.63 times more return on investment than Hoteles Bestprice. However, Credit Agricole SA is 1.59 times less risky than Hoteles Bestprice. It trades about 0.39 of its potential returns per unit of risk. Hoteles Bestprice SA is currently generating about 0.21 per unit of risk. If you would invest  1,331  in Credit Agricole SA on December 30, 2024 and sell it today you would earn a total of  364.00  from holding Credit Agricole SA or generate 27.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Credit Agricole SA  vs.  Hoteles Bestprice SA

Credit Agricole SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole SA are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Credit Agricole sustained solid returns over the last few months and may actually be approaching a breakup point.

Hoteles Bestprice

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hoteles Bestprice SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hoteles Bestprice reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credit Agricole and Hoteles Bestprice

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

The idea behind Credit Agricole SA and Hoteles Bestprice SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.