Correlation Between Eternit SA and Hotis Othon

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

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

Diversification Opportunities for Eternit SA and Hotis Othon

0.62

Correlation Coefficient

Eternit SA  Hotis Othon

Poor diversification

The 3 months correlation between Eternit and Hotis is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Eternit SA and Hotis Othon SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotis Othon SA and Eternit SA 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 Eternit SA are associated (or correlated) with Hotis Othon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotis Othon SA has no effect on the direction of Eternit SA i.e., Eternit SA and Hotis Othon go up and down completely randomly.

Pair Corralation between Eternit SA and Hotis Othon

Assuming the 90 days trading horizon Eternit SA is expected to under-perform the Hotis Othon. But the stock apears to be less risky and, when comparing its historical volatility, Eternit SA is 1.18 times less risky than Hotis Othon. The stock trades about -0.05 of its potential returns per unit of risk. The Hotis Othon SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  127.00  in Hotis Othon SA on October 11, 2024 and sell it today you would earn a total of  101.00  from holding Hotis Othon SA or generate 79.53% return on investment over 90 days.

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

Eternit SA  vs.  Hotis Othon SA

Eternit SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eternit SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hotis Othon SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hotis Othon SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hotis Othon is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eternit SA and Hotis Othon

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

The idea behind Eternit SA and Hotis Othon 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.