Correlation Between Les Hotels and Haffner Energy

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

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

Diversification Opportunities for Les Hotels and Haffner Energy

0.06

Correlation Coefficient

Les Hotels  Haffner Energy

Significant diversification

The 3 months correlation between Les and Haffner is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Les Hotels Bav and Haffner Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haffner Energy SA and Les 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 Les Hotels Bav are associated (or correlated) with Haffner Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haffner Energy SA has no effect on the direction of Les Hotels i.e., Les Hotels and Haffner Energy go up and down completely randomly.

Pair Corralation between Les Hotels and Haffner Energy

Assuming the 90 days trading horizon Les Hotels is expected to generate 15.48 times less return on investment than Haffner Energy. But when comparing it to its historical volatility, Les Hotels Bav is 3.88 times less risky than Haffner Energy. It trades about 0.02 of its potential returns per unit of risk. Haffner Energy SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Haffner Energy SA on September 27, 2024 and sell it today you would earn a total of  30.00  from holding Haffner Energy SA or generate 56.6% return on investment over 90 days.

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

Les Hotels Bav  vs.  Haffner Energy SA

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Haffner Energy SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haffner Energy 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.

Pair Trading with Les Hotels and Haffner Energy

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

The idea behind Les Hotels Bav and Haffner Energy 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.