Correlation Between Hispanotels Inversiones and Metrovacesa

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

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

Diversification Opportunities for Hispanotels Inversiones and Metrovacesa

0.5

Correlation Coefficient

Hispanotels Inversiones  Metrovacesa

Very weak diversification

The 3 months correlation between Hispanotels and Metrovacesa is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hispanotels Inversiones SOCIMI and Metrovacesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrovacesa SA and Hispanotels Inversiones 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 Hispanotels Inversiones SOCIMI are associated (or correlated) with Metrovacesa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrovacesa SA has no effect on the direction of Hispanotels Inversiones i.e., Hispanotels Inversiones and Metrovacesa go up and down completely randomly.

Pair Corralation between Hispanotels Inversiones and Metrovacesa

Assuming the 90 days trading horizon Hispanotels Inversiones SOCIMI is expected to generate 1.31 times more return on investment than Metrovacesa. However, Hispanotels Inversiones is 1.31 times more volatile than Metrovacesa SA. It trades about 0.2 of its potential returns per unit of risk. Metrovacesa SA is currently generating about 0.06 per unit of risk. If you would invest  590.00  in Hispanotels Inversiones SOCIMI on August 29, 2024 and sell it today you would earn a total of  105.00  from holding Hispanotels Inversiones SOCIMI or generate 17.8% return on investment over 90 days.

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

Hispanotels Inversiones SOCIMI  vs.  Metrovacesa SA

Hispanotels Inversiones

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hispanotels Inversiones SOCIMI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Hispanotels Inversiones exhibited solid returns over the last few months and may actually be approaching a breakup point.

Metrovacesa SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Metrovacesa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hispanotels Inversiones and Metrovacesa

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

The idea behind Hispanotels Inversiones SOCIMI and Metrovacesa 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.