Correlation Between Whitbread PLC and Accor SA

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

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

Diversification Opportunities for Whitbread PLC and Accor SA

-0.36

Correlation Coefficient

Whitbread PLC  Accor SA

Very good diversification

The 3 months correlation between Whitbread and Accor is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Whitbread PLC ADR and Accor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accor SA and Whitbread PLC 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 Whitbread PLC ADR are associated (or correlated) with Accor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accor SA has no effect on the direction of Whitbread PLC i.e., Whitbread PLC and Accor SA go up and down completely randomly.

Pair Corralation between Whitbread PLC and Accor SA

Assuming the 90 days horizon Whitbread PLC ADR is expected to under-perform the Accor SA. In addition to that, Whitbread PLC is 1.3 times more volatile than Accor SA. It trades about -0.09 of its total potential returns per unit of risk. Accor SA is currently generating about -0.04 per unit of volatility. If you would invest  981.00  in Accor SA on December 24, 2024 and sell it today you would lose (42.00) from holding Accor SA or give up 4.28% of portfolio value over 90 days.

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

Whitbread PLC ADR  vs.  Accor SA

Whitbread PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitbread PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Accor SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Accor SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Accor SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Whitbread PLC and Accor SA

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

The idea behind Whitbread PLC ADR and Accor 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.