Correlation Between Les Hotels and TaTaTu SpA

Can any of the company-specific risk be diversified away by investing in both Les Hotels and TaTaTu SpA 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 TaTaTu SpA 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 TaTaTu SpA, you can compare the effects of market volatilities on Les Hotels and TaTaTu SpA 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 TaTaTu SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Les Hotels and TaTaTu SpA.

Diversification Opportunities for Les Hotels and TaTaTu SpA

0.0

Correlation Coefficient

Les Hotels  TaTaTu SpA

Pay attention - limited upside

The 3 months correlation between Les and TaTaTu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Les Hotels Bav and TaTaTu SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TaTaTu SpA 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 TaTaTu SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TaTaTu SpA has no effect on the direction of Les Hotels i.e., Les Hotels and TaTaTu SpA go up and down completely randomly.

Pair Corralation between Les Hotels and TaTaTu SpA

Assuming the 90 days trading horizon Les Hotels Bav is expected to generate 5.82 times more return on investment than TaTaTu SpA. However, Les Hotels is 5.82 times more volatile than TaTaTu SpA. It trades about 0.02 of its potential returns per unit of risk. TaTaTu SpA is currently generating about -0.02 per unit of risk. If you would invest  7,000  in Les Hotels Bav on September 22, 2024 and sell it today you would earn a total of  150.00  from holding Les Hotels Bav or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.24%
Values	Daily Returns

Les Hotels Bav  vs.  TaTaTu SpA

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.

TaTaTu SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Les Hotels and TaTaTu SpA

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

The idea behind Les Hotels Bav and TaTaTu SpA 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.