Correlation Between Hoteles City and FibraHotel

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

By analyzing existing cross correlation between Hoteles City Express and FibraHotel, you can compare the effects of market volatilities on Hoteles City and FibraHotel 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 Hoteles City with a short position of FibraHotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoteles City and FibraHotel.

Diversification Opportunities for Hoteles City and FibraHotel

0.86

Correlation Coefficient

Hoteles City  FibraHotel

Very poor diversification

The 3 months correlation between Hoteles and FibraHotel is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hoteles City Express and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Hoteles City 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 Hoteles City Express are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Hoteles City i.e., Hoteles City and FibraHotel go up and down completely randomly.

Pair Corralation between Hoteles City and FibraHotel

Assuming the 90 days trading horizon Hoteles City Express is expected to under-perform the FibraHotel. But the stock apears to be less risky and, when comparing its historical volatility, Hoteles City Express is 1.37 times less risky than FibraHotel. The stock trades about -0.42 of its potential returns per unit of risk. The FibraHotel is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  980.00  in FibraHotel on February 13, 2024 and sell it today you would lose (63.00) from holding FibraHotel or give up 6.43% of portfolio value over 90 days.

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

Hoteles City Express  vs.  FibraHotel

Hoteles City Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles City Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

FibraHotel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hoteles City and FibraHotel

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

The idea behind Hoteles City Express and FibraHotel 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.