Correlation Between Hotel Majestic and ISPD Network

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

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

Diversification Opportunities for Hotel Majestic and ISPD Network

0.17

Correlation Coefficient

Hotel Majestic  ISPD Network

Average diversification

The 3 months correlation between Hotel and ISPD is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Majestic Cannes and ISPD Network SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISPD Network SA and Hotel Majestic 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 Hotel Majestic Cannes are associated (or correlated) with ISPD Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISPD Network SA has no effect on the direction of Hotel Majestic i.e., Hotel Majestic and ISPD Network go up and down completely randomly.

Pair Corralation between Hotel Majestic and ISPD Network

Assuming the 90 days trading horizon Hotel Majestic Cannes is expected to generate 1.41 times more return on investment than ISPD Network. However, Hotel Majestic is 1.41 times more volatile than ISPD Network SA. It trades about 0.05 of its potential returns per unit of risk. ISPD Network SA is currently generating about -0.03 per unit of risk. If you would invest  351,243  in Hotel Majestic Cannes on October 11, 2024 and sell it today you would earn a total of  178,757  from holding Hotel Majestic Cannes or generate 50.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.83%
Values	Daily Returns

Hotel Majestic Cannes  vs.  ISPD Network SA

Hotel Majestic Cannes

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Majestic Cannes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hotel Majestic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ISPD Network SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ISPD Network SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ISPD Network 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 Hotel Majestic and ISPD Network

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

The idea behind Hotel Majestic Cannes and ISPD Network 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.