Correlation Between Covivio Hotels and Eutelsat Communications

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

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

Diversification Opportunities for Covivio Hotels and Eutelsat Communications

-0.45

Correlation Coefficient

Covivio Hotels  Eutelsat Communications

Very good diversification

The 3 months correlation between Covivio and Eutelsat is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Covivio Hotels and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and Covivio Hotels 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 Covivio Hotels are associated (or correlated) with Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of Covivio Hotels i.e., Covivio Hotels and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Covivio Hotels and Eutelsat Communications

Assuming the 90 days trading horizon Covivio Hotels is expected to generate 0.48 times more return on investment than Eutelsat Communications. However, Covivio Hotels is 2.07 times less risky than Eutelsat Communications. It trades about 0.09 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.32 per unit of risk. If you would invest  1,885  in Covivio Hotels on September 28, 2024 and sell it today you would earn a total of  135.00  from holding Covivio Hotels or generate 7.16% return on investment over 90 days.

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

Covivio Hotels  vs.  Eutelsat Communications SA

Covivio Hotels

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covivio Hotels are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Covivio Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eutelsat Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eutelsat Communications SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat 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.

Pair Trading with Covivio Hotels and Eutelsat Communications

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

The idea behind Covivio Hotels and Eutelsat Communications 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.