Correlation Between Covivio Hotels and Hoteles Bestprice

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

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

Diversification Opportunities for Covivio Hotels and Hoteles Bestprice

0.09

Correlation Coefficient

Covivio Hotels  Hoteles Bestprice

Significant diversification

The 3 months correlation between Covivio and Hoteles is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Covivio Hotels and Hoteles Bestprice SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles Bestprice and Covivio 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 Covivio Hotels are associated (or correlated) with Hoteles Bestprice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles Bestprice has no effect on the direction of Covivio Hotels i.e., Covivio Hotels and Hoteles Bestprice go up and down completely randomly.

Pair Corralation between Covivio Hotels and Hoteles Bestprice

Assuming the 90 days trading horizon Covivio Hotels is expected to generate 0.7 times more return on investment than Hoteles Bestprice. However, Covivio Hotels is 1.43 times less risky than Hoteles Bestprice. It trades about -0.01 of its potential returns per unit of risk. Hoteles Bestprice SA is currently generating about -0.14 per unit of risk. If you would invest  1,910  in Covivio Hotels on September 13, 2024 and sell it today you would lose (15.00) from holding Covivio Hotels or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Covivio Hotels  vs.  Hoteles Bestprice SA

Covivio Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covivio Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Covivio Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hoteles Bestprice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles Bestprice 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 Covivio Hotels and Hoteles Bestprice

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

The idea behind Covivio Hotels and Hoteles Bestprice 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.