Correlation Between Alsea SAB and Hoteles City

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

By analyzing existing cross correlation between Alsea SAB de and Hoteles City Express, you can compare the effects of market volatilities on Alsea SAB and Hoteles City 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 Alsea SAB with a short position of Hoteles City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alsea SAB and Hoteles City.

Diversification Opportunities for Alsea SAB and Hoteles City

0.29

Correlation Coefficient

Alsea SAB  Hoteles City

Modest diversification

The 3 months correlation between Alsea and Hoteles is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alsea SAB de and Hoteles City Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles City Express and Alsea SAB 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 Alsea SAB de are associated (or correlated) with Hoteles City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles City Express has no effect on the direction of Alsea SAB i.e., Alsea SAB and Hoteles City go up and down completely randomly.

Pair Corralation between Alsea SAB and Hoteles City

Assuming the 90 days trading horizon Alsea SAB de is expected to under-perform the Hoteles City. But the stock apears to be less risky and, when comparing its historical volatility, Alsea SAB de is 1.87 times less risky than Hoteles City. The stock trades about -0.1 of its potential returns per unit of risk. The Hoteles City Express is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  455.00  in Hoteles City Express on September 12, 2024 and sell it today you would lose (12.00) from holding Hoteles City Express or give up 2.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Alsea SAB de  vs.  Hoteles City Express

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hoteles City Express

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Hoteles City Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Hoteles City is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alsea SAB and Hoteles City

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

The idea behind Alsea SAB de and Hoteles City Express 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.