Correlation Between Waste Management and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Melia Hotels, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Melia Hotels.
Diversification Opportunities for Waste Management and Melia Hotels
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Waste and Melia is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Melia Hotels go up and down completely randomly.
Pair Corralation between Waste Management and Melia Hotels
Assuming the 90 days trading horizon Waste Management is expected to under-perform the Melia Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 1.27 times less risky than Melia Hotels. The stock trades about -0.03 of its potential returns per unit of risk. The Melia Hotels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 684.00 in Melia Hotels on November 3, 2024 and sell it today you would earn a total of 35.00 from holding Melia Hotels or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Waste Management vs. Melia Hotels
Performance |
| Timeline |
| Waste Management |
| Melia Hotels |
Waste Management and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Melia Hotels
The main advantage of trading using opposite Waste Management and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Iron Mountain | Waste Management vs. Compal Electronics GDR | Waste Management vs. Cellnex Telecom SA | Waste Management vs. Seche Environnement SA |
| Melia Hotels vs. Spirent Communications plc | Melia Hotels vs. Global Net Lease | Melia Hotels vs. Gamma Communications PLC | Melia Hotels vs. Universal Music Group |
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 Stocks Directory module to find actively traded stocks across global markets.
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