Correlation Between Hoteles City and ALPEK SAB

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

By analyzing existing cross correlation between Hoteles City Express and ALPEK SAB de, you can compare the effects of market volatilities on Hoteles City and ALPEK SAB 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 Hoteles City with a short position of ALPEK SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoteles City and ALPEK SAB.

Diversification Opportunities for Hoteles City and ALPEK SAB

0.56

Correlation Coefficient

Hoteles City  ALPEK SAB

Very weak diversification

The 3 months correlation between Hoteles and ALPEK is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hoteles City Express and ALPEK SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPEK SAB de and Hoteles City 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 Hoteles City Express are associated (or correlated) with ALPEK SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPEK SAB de has no effect on the direction of Hoteles City i.e., Hoteles City and ALPEK SAB go up and down completely randomly.

Pair Corralation between Hoteles City and ALPEK SAB

Assuming the 90 days trading horizon Hoteles City Express is expected to generate 0.59 times more return on investment than ALPEK SAB. However, Hoteles City Express is 1.69 times less risky than ALPEK SAB. It trades about -0.04 of its potential returns per unit of risk. ALPEK SAB de is currently generating about -0.04 per unit of risk. If you would invest  452.00  in Hoteles City Express on December 22, 2024 and sell it today you would lose (24.00) from holding Hoteles City Express or give up 5.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Hoteles City Express  vs.  ALPEK SAB de

Hoteles City Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hoteles City Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Hoteles City is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ALPEK SAB de

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPEK SAB de 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.

Pair Trading with Hoteles City and ALPEK SAB

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

The idea behind Hoteles City Express and ALPEK SAB de 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.