Correlation Between Vodafone Group and Hoteles City

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

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

Diversification Opportunities for Vodafone Group and Hoteles City

0.17

Correlation Coefficient

Vodafone Group  Hoteles City

Average diversification

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

Pair Corralation between Vodafone Group and Hoteles City

Assuming the 90 days trading horizon Vodafone Group is expected to generate 1.53 times less return on investment than Hoteles City. But when comparing it to its historical volatility, Vodafone Group Plc is 2.22 times less risky than Hoteles City. It trades about 0.04 of its potential returns per unit of risk. Hoteles City Express is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  421.00  in Hoteles City Express on September 27, 2024 and sell it today you would earn a total of  25.00  from holding Hoteles City Express or generate 5.94% return on investment over 90 days.

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

Vodafone Group Plc  vs.  Hoteles City Express

Vodafone Group Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hoteles City Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles City Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Hoteles City is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vodafone Group and Hoteles City

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

The idea behind Vodafone Group Plc and Hoteles City Express 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.