Correlation Between Compania Espanola and EDreams Odigeo

Can any of the company-specific risk be diversified away by investing in both Compania Espanola and EDreams Odigeo 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 Compania Espanola and EDreams Odigeo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compania Espanola de and eDreams Odigeo SA, you can compare the effects of market volatilities on Compania Espanola and EDreams Odigeo 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 Compania Espanola with a short position of EDreams Odigeo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Espanola and EDreams Odigeo.

Diversification Opportunities for Compania Espanola and EDreams Odigeo

-0.63

Correlation Coefficient

Compania Espanola  EDreams Odigeo

Excellent diversification

The 3 months correlation between Compania and EDreams is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Compania Espanola de and eDreams Odigeo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eDreams Odigeo SA and Compania Espanola 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 Compania Espanola de are associated (or correlated) with EDreams Odigeo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eDreams Odigeo SA has no effect on the direction of Compania Espanola i.e., Compania Espanola and EDreams Odigeo go up and down completely randomly.

Pair Corralation between Compania Espanola and EDreams Odigeo

Assuming the 90 days trading horizon Compania Espanola is expected to generate 3.43 times less return on investment than EDreams Odigeo. In addition to that, Compania Espanola is 1.3 times more volatile than eDreams Odigeo SA. It trades about 0.04 of its total potential returns per unit of risk. eDreams Odigeo SA is currently generating about 0.18 per unit of volatility. If you would invest  685.00  in eDreams Odigeo SA on November 28, 2024 and sell it today you would earn a total of  130.00  from holding eDreams Odigeo SA or generate 18.98% return on investment over 90 days.

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

Compania Espanola de  vs.  eDreams Odigeo SA

Compania Espanola

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Espanola de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Compania Espanola is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

eDreams Odigeo SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eDreams Odigeo SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EDreams Odigeo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Espanola and EDreams Odigeo

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

The idea behind Compania Espanola de and eDreams Odigeo 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.