Correlation Between Seche Environnem and Covivio Hotels

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

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

Diversification Opportunities for Seche Environnem and Covivio Hotels

0.21

Correlation Coefficient

Seche Environnem  Covivio Hotels

Modest diversification

The 3 months correlation between Seche and Covivio is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Seche Environnem and Covivio Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covivio Hotels and Seche Environnem 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 Seche Environnem 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 Seche Environnem i.e., Seche Environnem and Covivio Hotels go up and down completely randomly.

Pair Corralation between Seche Environnem and Covivio Hotels

Assuming the 90 days trading horizon Seche Environnem is expected to under-perform the Covivio Hotels. In addition to that, Seche Environnem is 1.52 times more volatile than Covivio Hotels. It trades about -0.11 of its total potential returns per unit of risk. Covivio Hotels is currently generating about -0.05 per unit of volatility. If you would invest  1,930  in Covivio Hotels on September 12, 2024 and sell it today you would lose (80.00) from holding Covivio Hotels or give up 4.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Seche Environnem  vs.  Covivio Hotels

Seche Environnem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seche Environnem 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.

Covivio Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covivio Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Covivio Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seche Environnem and Covivio Hotels

The main advantage of trading using opposite Seche Environnem and Covivio Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seche Environnem 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 Seche Environnem 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.