Correlation Between Air France and Hotelim Socit

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

By analyzing existing cross correlation between Air France KLM SA and Hotelim Socit Anonyme, you can compare the effects of market volatilities on Air France and Hotelim Socit 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 Air France with a short position of Hotelim Socit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France and Hotelim Socit.

Diversification Opportunities for Air France and Hotelim Socit

0.23

Correlation Coefficient

Air France  Hotelim Socit

Modest diversification

The 3 months correlation between Air and Hotelim is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Hotelim Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotelim Socit Anonyme and Air France 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 Air France KLM SA are associated (or correlated) with Hotelim Socit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotelim Socit Anonyme has no effect on the direction of Air France i.e., Air France and Hotelim Socit go up and down completely randomly.

Pair Corralation between Air France and Hotelim Socit

Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Hotelim Socit. In addition to that, Air France is 5.3 times more volatile than Hotelim Socit Anonyme. It trades about -0.03 of its total potential returns per unit of risk. Hotelim Socit Anonyme is currently generating about -0.03 per unit of volatility. If you would invest  3,980  in Hotelim Socit Anonyme on September 13, 2024 and sell it today you would lose (40.00) from holding Hotelim Socit Anonyme or give up 1.01% of portfolio value over 90 days.

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

Air France KLM SA  vs.  Hotelim Socit Anonyme

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hotelim Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotelim Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Hotelim Socit is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Air France and Hotelim Socit

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

The idea behind Air France KLM SA and Hotelim Socit Anonyme 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.