Correlation Between Live Nation and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Live Nation 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 Live Nation and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Live Nation Entertainment and Melia Hotels, you can compare the effects of market volatilities on Live Nation 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 Live Nation with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and Melia Hotels.
Diversification Opportunities for Live Nation and Melia Hotels
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Live and Melia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Live Nation 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 Live Nation Entertainment 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 Live Nation i.e., Live Nation and Melia Hotels go up and down completely randomly.
Pair Corralation between Live Nation and Melia Hotels
Assuming the 90 days trading horizon Live Nation Entertainment is expected to under-perform the Melia Hotels. In addition to that, Live Nation is 1.04 times more volatile than Melia Hotels. It trades about -0.13 of its total potential returns per unit of risk. Melia Hotels is currently generating about -0.06 per unit of volatility. If you would invest 734.00 in Melia Hotels on October 11, 2024 and sell it today you would lose (11.00) from holding Melia Hotels or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Live Nation Entertainment vs. Melia Hotels
Performance |
| Timeline |
| Live Nation Entertainment |
| Melia Hotels |
Live Nation and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Nation and Melia Hotels
The main advantage of trading using opposite Live Nation and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation 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.| Live Nation vs. Catalyst Media Group | Live Nation vs. Infrastrutture Wireless Italiane | Live Nation vs. Ubisoft Entertainment | Live Nation vs. AcadeMedia AB |
| Melia Hotels vs. Host Hotels Resorts | Melia Hotels vs. Delta Air Lines | Melia Hotels vs. Live Nation Entertainment | Melia Hotels vs. Wizz Air Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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