Correlation Between Covivio Hotels and Soditech

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

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

Diversification Opportunities for Covivio Hotels and Soditech

-0.48

Correlation Coefficient

Covivio Hotels  Soditech

Very good diversification

The 3 months correlation between Covivio and Soditech is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Covivio Hotels and Soditech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soditech SA 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 Soditech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soditech SA has no effect on the direction of Covivio Hotels i.e., Covivio Hotels and Soditech go up and down completely randomly.

Pair Corralation between Covivio Hotels and Soditech

Assuming the 90 days trading horizon Covivio Hotels is expected to generate 1.29 times less return on investment than Soditech. But when comparing it to its historical volatility, Covivio Hotels is 4.93 times less risky than Soditech. It trades about 0.08 of its potential returns per unit of risk. Soditech SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  156.00  in Soditech SA on October 10, 2024 and sell it today you would lose (33.00) from holding Soditech SA or give up 21.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.01%
Values	Daily Returns

Covivio Hotels  vs.  Soditech SA

Covivio Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covivio Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Covivio Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Soditech SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Soditech SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Soditech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Covivio Hotels and Soditech

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

The idea behind Covivio Hotels and Soditech 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.