Correlation Between Hotel Majestic and Eutelsat Communications

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

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

Diversification Opportunities for Hotel Majestic and Eutelsat Communications

0.27

Correlation Coefficient

Hotel Majestic  Eutelsat Communications

Modest diversification

The 3 months correlation between Hotel and Eutelsat is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Majestic Cannes and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and Hotel Majestic 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 Hotel Majestic Cannes 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 Hotel Majestic i.e., Hotel Majestic and Eutelsat Communications go up and down completely randomly.

Pair Corralation between Hotel Majestic and Eutelsat Communications

Assuming the 90 days trading horizon Hotel Majestic Cannes is expected to generate 0.71 times more return on investment than Eutelsat Communications. However, Hotel Majestic Cannes is 1.41 times less risky than Eutelsat Communications. It trades about -0.04 of its potential returns per unit of risk. Eutelsat Communications SA is currently generating about -0.28 per unit of risk. If you would invest  545,000  in Hotel Majestic Cannes on September 1, 2024 and sell it today you would lose (25,000) from holding Hotel Majestic Cannes or give up 4.59% of portfolio value over 90 days.

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

Hotel Majestic Cannes  vs.  Eutelsat Communications SA

Hotel Majestic Cannes

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hotel Majestic and Eutelsat Communications

The main advantage of trading using opposite Hotel Majestic and Eutelsat Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotel Majestic 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 Hotel Majestic Cannes 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.