Correlation Between Whitbread Plc and Accor SA

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

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

Diversification Opportunities for Whitbread Plc and Accor SA

-0.31

Correlation Coefficient

Whitbread Plc  Accor SA

Very good diversification

The 3 months correlation between Whitbread and Accor is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Whitbread plc and Accor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accor SA and Whitbread Plc 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 Whitbread plc are associated (or correlated) with Accor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accor SA has no effect on the direction of Whitbread Plc i.e., Whitbread Plc and Accor SA go up and down completely randomly.

Pair Corralation between Whitbread Plc and Accor SA

Assuming the 90 days horizon Whitbread plc is expected to under-perform the Accor SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Whitbread plc is 1.56 times less risky than Accor SA. The pink sheet trades about -0.3 of its potential returns per unit of risk. The Accor SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,685  in Accor SA on January 31, 2024 and sell it today you would lose (80.00) from holding Accor SA or give up 1.71% of portfolio value over 90 days.

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

Whitbread plc  vs.  Accor SA

Whitbread plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitbread plc 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 fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Accor SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Accor SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Accor SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Whitbread Plc and Accor SA

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

The idea behind Whitbread plc and Accor 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.