Correlation Between Aelis Farma and Les Hotels

Can any of the company-specific risk be diversified away by investing in both Aelis Farma and Les 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 Aelis Farma and Les Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aelis Farma SA and Les Hotels Bav, you can compare the effects of market volatilities on Aelis Farma and Les 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 Aelis Farma with a short position of Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aelis Farma and Les Hotels.

Diversification Opportunities for Aelis Farma and Les Hotels

0.48

Correlation Coefficient

Aelis Farma  Les Hotels

Very weak diversification

The 3 months correlation between Aelis and Les is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Aelis Farma SA and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav and Aelis Farma 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 Aelis Farma SA are associated (or correlated) with Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of Aelis Farma i.e., Aelis Farma and Les Hotels go up and down completely randomly.

Pair Corralation between Aelis Farma and Les Hotels

Assuming the 90 days trading horizon Aelis Farma SA is expected to under-perform the Les Hotels. In addition to that, Aelis Farma is 3.33 times more volatile than Les Hotels Bav. It trades about -0.36 of its total potential returns per unit of risk. Les Hotels Bav is currently generating about -0.07 per unit of volatility. If you would invest  7,500  in Les Hotels Bav on September 14, 2024 and sell it today you would lose (350.00) from holding Les Hotels Bav or give up 4.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Aelis Farma SA  vs.  Les Hotels Bav

Aelis Farma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aelis Farma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Les Hotels Bav

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Les Hotels Bav has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Les Hotels is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aelis Farma and Les Hotels

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

The idea behind Aelis Farma SA and Les Hotels Bav 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.