Correlation Between Melia Hotels and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Norwegian Air 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 Melia Hotels and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Norwegian Air Shuttle, you can compare the effects of market volatilities on Melia Hotels and Norwegian Air 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 Melia Hotels with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Norwegian Air.
Diversification Opportunities for Melia Hotels and Norwegian Air
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Melia and Norwegian is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and Melia Hotels 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 Melia Hotels are associated (or correlated) with Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Melia Hotels i.e., Melia Hotels and Norwegian Air go up and down completely randomly.
Pair Corralation between Melia Hotels and Norwegian Air
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.89 times more return on investment than Norwegian Air. However, Melia Hotels is 1.12 times less risky than Norwegian Air. It trades about 0.19 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.07 per unit of risk. If you would invest 695.00 in Melia Hotels on September 24, 2024 and sell it today you would earn a total of 50.00 from holding Melia Hotels or generate 7.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Melia Hotels |
| Norwegian Air Shuttle |
Melia Hotels and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Norwegian Air
The main advantage of trading using opposite Melia Hotels and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| Melia Hotels vs. Uniper SE | Melia Hotels vs. Mulberry Group PLC | Melia Hotels vs. London Security Plc | Melia Hotels vs. Triad Group PLC |
| Norwegian Air vs. Uniper SE | Norwegian Air vs. Mulberry Group PLC | Norwegian Air vs. London Security Plc | Norwegian Air vs. Triad Group PLC |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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