Correlation Between BEBO Health and Covivio Hotels

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

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

Diversification Opportunities for BEBO Health and Covivio Hotels

-0.01

Correlation Coefficient

BEBO Health  Covivio Hotels

Good diversification

The 3 months correlation between BEBO and Covivio is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BEBO Health SA and Covivio Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covivio Hotels and BEBO Health 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 BEBO Health SA are associated (or correlated) with Covivio Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covivio Hotels has no effect on the direction of BEBO Health i.e., BEBO Health and Covivio Hotels go up and down completely randomly.

Pair Corralation between BEBO Health and Covivio Hotels

If you would invest  1,850  in Covivio Hotels on September 25, 2024 and sell it today you would earn a total of  180.00  from holding Covivio Hotels or generate 9.73% return on investment over 90 days.

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

BEBO Health SA  vs.  Covivio Hotels

BEBO Health SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Covivio Hotels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covivio Hotels are ranked lower than 6 (%) 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 January 2025.

Pair Trading with BEBO Health and Covivio Hotels

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

The idea behind BEBO Health SA and Covivio Hotels 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.