Correlation Between Sodexo SA and Hoteles Bestprice

Can any of the company-specific risk be diversified away by investing in both Sodexo SA and Hoteles Bestprice 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 Sodexo SA and Hoteles Bestprice into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sodexo SA and Hoteles Bestprice

-0.34

Correlation Coefficient

Sodexo SA  Hoteles Bestprice

Very good diversification

The 3 months correlation between Sodexo and Hoteles is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo SA and Hoteles Bestprice SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles Bestprice and Sodexo SA 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 Sodexo SA are associated (or correlated) with Hoteles Bestprice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles Bestprice has no effect on the direction of Sodexo SA i.e., Sodexo SA and Hoteles Bestprice go up and down completely randomly.

Pair Corralation between Sodexo SA and Hoteles Bestprice

Assuming the 90 days horizon Sodexo SA is expected to under-perform the Hoteles Bestprice. In addition to that, Sodexo SA is 1.67 times more volatile than Hoteles Bestprice SA. It trades about -0.15 of its total potential returns per unit of risk. Hoteles Bestprice SA is currently generating about 0.21 per unit of volatility. If you would invest  300.00  in Hoteles Bestprice SA on December 30, 2024 and sell it today you would earn a total of  66.00  from holding Hoteles Bestprice SA or generate 22.0% return on investment over 90 days.

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

Sodexo SA  vs.  Hoteles Bestprice SA

Sodexo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sodexo SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hoteles Bestprice

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hoteles Bestprice SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hoteles Bestprice reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sodexo SA and Hoteles Bestprice

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

The idea behind Sodexo SA and Hoteles Bestprice 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.