Correlation Between Melia Hotels and Indutrade
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Indutrade 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 Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Indutrade AB, you can compare the effects of market volatilities on Melia Hotels and Indutrade 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 Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Indutrade.
Diversification Opportunities for Melia Hotels and Indutrade
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Melia and Indutrade is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB 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 Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Melia Hotels i.e., Melia Hotels and Indutrade go up and down completely randomly.
Pair Corralation between Melia Hotels and Indutrade
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.93 times more return on investment than Indutrade. However, Melia Hotels is 1.08 times less risky than Indutrade. It trades about 0.06 of its potential returns per unit of risk. Indutrade AB is currently generating about 0.03 per unit of risk. If you would invest 604.00 in Melia Hotels on September 12, 2024 and sell it today you would earn a total of 139.00 from holding Melia Hotels or generate 23.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Indutrade AB
Performance |
| Timeline |
| Melia Hotels |
| Indutrade AB |
Melia Hotels and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Indutrade
The main advantage of trading using opposite Melia Hotels and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| Melia Hotels vs. Hong Kong Land | Melia Hotels vs. Neometals | Melia Hotels vs. Coor Service Management | Melia Hotels vs. Fidelity Sustainable USD |
| Indutrade vs. Hong Kong Land | Indutrade vs. Neometals | Indutrade vs. Coor Service Management | Indutrade vs. Fidelity Sustainable USD |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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