Correlation Between Hotel Majestic and Les Hotels

Can any of the company-specific risk be diversified away by investing in both Hotel Majestic 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 Hotel Majestic and Les Hotels 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 Les Hotels Bav, you can compare the effects of market volatilities on Hotel Majestic 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 Hotel Majestic with a short position of Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotel Majestic and Les Hotels.

Diversification Opportunities for Hotel Majestic and Les Hotels

0.46

Correlation Coefficient

Hotel Majestic  Les Hotels

Very weak diversification

The 3 months correlation between Hotel and Les is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Majestic Cannes 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 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 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 Hotel Majestic i.e., Hotel Majestic and Les Hotels go up and down completely randomly.

Pair Corralation between Hotel Majestic and Les Hotels

Assuming the 90 days trading horizon Hotel Majestic is expected to generate 1.12 times less return on investment than Les Hotels. But when comparing it to its historical volatility, Hotel Majestic Cannes is 1.85 times less risky than Les Hotels. It trades about 0.06 of its potential returns per unit of risk. 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 30, 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hotel Majestic Cannes  vs.  Les Hotels Bav

Hotel Majestic Cannes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Majestic Cannes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hotel Majestic is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 Hotel Majestic and Les Hotels

The main advantage of trading using opposite Hotel Majestic and Les Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotel Majestic 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 Hotel Majestic Cannes 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.