Correlation Between Bouygues and Hotel Majestic

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

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

Diversification Opportunities for Bouygues and Hotel Majestic

0.15

Correlation Coefficient

Bouygues  Hotel Majestic

Average diversification

The 3 months correlation between Bouygues and Hotel is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bouygues SA and Hotel Majestic Cannes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Majestic Cannes and Bouygues 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 Bouygues SA are associated (or correlated) with Hotel Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Majestic Cannes has no effect on the direction of Bouygues i.e., Bouygues and Hotel Majestic go up and down completely randomly.

Pair Corralation between Bouygues and Hotel Majestic

Assuming the 90 days horizon Bouygues is expected to generate 10.36 times less return on investment than Hotel Majestic. But when comparing it to its historical volatility, Bouygues SA is 2.15 times less risky than Hotel Majestic. It trades about 0.01 of its potential returns per unit of risk. Hotel Majestic Cannes is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  327,584  in Hotel Majestic Cannes on September 28, 2024 and sell it today you would earn a total of  192,416  from holding Hotel Majestic Cannes or generate 58.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.84%
Values	Daily Returns

Bouygues SA  vs.  Hotel Majestic Cannes

Bouygues SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bouygues SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hotel Majestic Cannes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Majestic Cannes has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Hotel Majestic is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bouygues and Hotel Majestic

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

The idea behind Bouygues SA and Hotel Majestic Cannes 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.