Correlation Between Marie Brizard and Les Hotels

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

By analyzing existing cross correlation between Marie Brizard Wine and Les Hotels Bav, you can compare the effects of market volatilities on Marie Brizard and Les Hotels 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 Marie Brizard with a short position of Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marie Brizard and Les Hotels.

Diversification Opportunities for Marie Brizard and Les Hotels

-0.12

Correlation Coefficient

Marie Brizard  Les Hotels

Good diversification

The 3 months correlation between Marie and Les is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Marie Brizard Wine and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav and Marie Brizard 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 Marie Brizard Wine are associated (or correlated) with Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of Marie Brizard i.e., Marie Brizard and Les Hotels go up and down completely randomly.

Pair Corralation between Marie Brizard and Les Hotels

Assuming the 90 days trading horizon Marie Brizard Wine is expected to under-perform the Les Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Marie Brizard Wine is 1.35 times less risky than Les Hotels. The stock trades about -0.09 of its potential returns per unit of risk. The Les Hotels Bav is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,200  in Les Hotels Bav on December 29, 2024 and sell it today you would earn a total of  300.00  from holding Les Hotels Bav or generate 4.17% return on investment over 90 days.

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

Marie Brizard Wine  vs.  Les Hotels Bav

Marie Brizard Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marie Brizard Wine 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.

Les Hotels Bav

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Les Hotels Bav are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Les Hotels 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 Marie Brizard and Les Hotels

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

The idea behind Marie Brizard Wine and Les Hotels Bav 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.