Correlation Between Melia Hotels and AES Corp
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and AES Corp 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 AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and AES Corp, you can compare the effects of market volatilities on Melia Hotels and AES Corp 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 AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and AES Corp.
Diversification Opportunities for Melia Hotels and AES Corp
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Melia and AES is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of Melia Hotels i.e., Melia Hotels and AES Corp go up and down completely randomly.
Pair Corralation between Melia Hotels and AES Corp
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.68 times more return on investment than AES Corp. However, Melia Hotels is 1.47 times less risky than AES Corp. It trades about 0.11 of its potential returns per unit of risk. AES Corp is currently generating about 0.04 per unit of risk. If you would invest 728.00 in Melia Hotels on September 13, 2024 and sell it today you would earn a total of 25.00 from holding Melia Hotels or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. AES Corp
Performance |
| Timeline |
| Melia Hotels |
| AES Corp |
Melia Hotels and AES Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and AES Corp
The main advantage of trading using opposite Melia Hotels and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.| Melia Hotels vs. Silvercorp Metals | Melia Hotels vs. Gaztransport et Technigaz | Melia Hotels vs. Evolution Gaming Group | Melia Hotels vs. Wheaton Precious Metals |
| AES Corp vs. Playtech Plc | AES Corp vs. Wyndham Hotels Resorts | AES Corp vs. Medical Properties Trust | AES Corp vs. Melia Hotels |
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 CEOs Directory module to screen CEOs from public companies around the world.
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