Correlation Between SA Catana and Les Hotels

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

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

Diversification Opportunities for SA Catana and Les Hotels

0.15

Correlation Coefficient

SA Catana  Les Hotels

Average diversification

The 3 months correlation between CATG and Les is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SA Catana Group and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav and SA Catana 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 SA Catana Group are associated (or correlated) with Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of SA Catana i.e., SA Catana and Les Hotels go up and down completely randomly.

Pair Corralation between SA Catana and Les Hotels

Assuming the 90 days trading horizon SA Catana Group is expected to generate 2.36 times more return on investment than Les Hotels. However, SA Catana is 2.36 times more volatile than Les Hotels Bav. It trades about 0.04 of its potential returns per unit of risk. Les Hotels Bav is currently generating about -0.06 per unit of risk. If you would invest  473.00  in SA Catana Group on September 16, 2024 and sell it today you would earn a total of  22.00  from holding SA Catana Group or generate 4.65% return on investment over 90 days.

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

SA Catana Group  vs.  Les Hotels Bav

SA Catana Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SA Catana Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SA Catana is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Les Hotels Bav

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SA Catana and Les Hotels

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

The idea behind SA Catana Group and Les Hotels Bav 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.