Correlation Between Vivendi SA and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Vivendi SA and Melia Hotels 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 Vivendi SA and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vivendi SA and Melia Hotels, you can compare the effects of market volatilities on Vivendi SA and Melia Hotels 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 Vivendi SA with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vivendi SA and Melia Hotels.
Diversification Opportunities for Vivendi SA and Melia Hotels
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vivendi and Melia is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vivendi SA and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Vivendi SA 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 Vivendi SA are associated (or correlated) with Melia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melia Hotels has no effect on the direction of Vivendi SA i.e., Vivendi SA and Melia Hotels go up and down completely randomly.
Pair Corralation between Vivendi SA and Melia Hotels
Assuming the 90 days trading horizon Vivendi SA is expected to generate 1.51 times more return on investment than Melia Hotels. However, Vivendi SA is 1.51 times more volatile than Melia Hotels. It trades about 0.15 of its potential returns per unit of risk. Melia Hotels is currently generating about -0.1 per unit of risk. If you would invest 258.00 in Vivendi SA on November 3, 2024 and sell it today you would earn a total of 15.00 from holding Vivendi SA or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vivendi SA vs. Melia Hotels
Performance |
| Timeline |
| Vivendi SA |
| Melia Hotels |
Vivendi SA and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vivendi SA and Melia Hotels
The main advantage of trading using opposite Vivendi SA and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vivendi SA position performs unexpectedly, Melia Hotels 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 Melia Hotels will offset losses from the drop in Melia Hotels' long position.| Vivendi SA vs. Chocoladefabriken Lindt Spruengli | Vivendi SA vs. Rockwood Realisation PLC | Vivendi SA vs. Toyota Motor Corp | Vivendi SA vs. Johnson Matthey PLC |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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