Correlation Between STMicroelectronics and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Melia Hotels, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Melia Hotels.
Diversification Opportunities for STMicroelectronics and Melia Hotels
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and Melia is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Melia Hotels go up and down completely randomly.
Pair Corralation between STMicroelectronics and Melia Hotels
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Melia Hotels. In addition to that, STMicroelectronics is 2.32 times more volatile than Melia Hotels. It trades about -0.04 of its total potential returns per unit of risk. Melia Hotels is currently generating about -0.05 per unit of volatility. If you would invest 686.00 in Melia Hotels on September 2, 2024 and sell it today you would lose (9.00) from holding Melia Hotels or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Melia Hotels
Performance |
| Timeline |
| STMicroelectronics |
| Melia Hotels |
STMicroelectronics and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Melia Hotels
The main advantage of trading using opposite STMicroelectronics and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Cloudcoco Group PLC | STMicroelectronics vs. Trainline Plc | STMicroelectronics vs. Diversified Energy |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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