Correlation Between Les Hotels and Eutelsat Communications

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

Diversification Opportunities for Les Hotels and Eutelsat Communications

-0.33

Correlation Coefficient

Les Hotels  Eutelsat Communications

Very good diversification

The 3 months correlation between Les and Eutelsat is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Les Hotels Bav and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications 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 Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Les Hotels i.e., Les Hotels and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Les Hotels and Eutelsat Communications

Assuming the 90 days trading horizon Les Hotels Bav is expected to generate 0.72 times more return on investment than Eutelsat Communications. However, Les Hotels Bav is 1.38 times less risky than Eutelsat Communications. It trades about 0.03 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.08 per unit of risk. If you would invest  6,047  in Les Hotels Bav on October 9, 2024 and sell it today you would earn a total of  1,153  from holding Les Hotels Bav or generate 19.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.84%
Values	Daily Returns

Les Hotels Bav  vs.  Eutelsat Communications SA

Les Hotels Bav

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Les Hotels Bav are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Eutelsat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eutelsat Communications SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Les Hotels and Eutelsat Communications

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

The idea behind Les Hotels Bav and Eutelsat Communications 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.