Correlation Between CM Hospitalar and Expedia

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

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

Diversification Opportunities for CM Hospitalar and Expedia

-0.32

Correlation Coefficient

CM Hospitalar  Expedia

Very good diversification

The 3 months correlation between VVEO3 and Expedia is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CM Hospitalar SA and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group and CM Hospitalar 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 CM Hospitalar SA are associated (or correlated) with Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of CM Hospitalar i.e., CM Hospitalar and Expedia go up and down completely randomly.

Pair Corralation between CM Hospitalar and Expedia

Assuming the 90 days trading horizon CM Hospitalar SA is expected to under-perform the Expedia. In addition to that, CM Hospitalar is 1.99 times more volatile than Expedia Group. It trades about -0.01 of its total potential returns per unit of risk. Expedia Group is currently generating about 0.1 per unit of volatility. If you would invest  44,850  in Expedia Group on October 26, 2024 and sell it today you would earn a total of  6,150  from holding Expedia Group or generate 13.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

CM Hospitalar SA  vs.  Expedia Group

CM Hospitalar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CM Hospitalar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Expedia Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Expedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CM Hospitalar and Expedia

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

The idea behind CM Hospitalar SA and Expedia Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.