Correlation Between Hotel Majestic and Reworld Media

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

Diversification Opportunities for Hotel Majestic and Reworld Media

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Hotel and Reworld is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Majestic Cannes and Reworld Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reworld Media 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 Reworld Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reworld Media has no effect on the direction of Hotel Majestic i.e., Hotel Majestic and Reworld Media go up and down completely randomly.

Pair Corralation between Hotel Majestic and Reworld Media

Assuming the 90 days trading horizon Hotel Majestic Cannes is expected to generate 0.45 times more return on investment than Reworld Media. However, Hotel Majestic Cannes is 2.22 times less risky than Reworld Media. It trades about 0.05 of its potential returns per unit of risk. Reworld Media is currently generating about -0.1 per unit of risk. If you would invest  505,000  in Hotel Majestic Cannes on October 26, 2024 and sell it today you would earn a total of  45,000  from holding Hotel Majestic Cannes or generate 8.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hotel Majestic Cannes  vs.  Reworld Media

 Performance 
       Timeline  
Hotel Majestic Cannes 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
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.
Reworld Media 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Reworld Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hotel Majestic and Reworld Media Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hotel Majestic and Reworld Media

The main advantage of trading using opposite Hotel Majestic and Reworld Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotel Majestic position performs unexpectedly, Reworld Media 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 Reworld Media will offset losses from the drop in Reworld Media's long position.
The idea behind Hotel Majestic Cannes and Reworld Media 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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