Correlation Between Melia Hotels and Air Products
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Air Products 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 Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Air Products Chemicals, you can compare the effects of market volatilities on Melia Hotels and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Air Products.
Diversification Opportunities for Melia Hotels and Air Products
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Melia and Air is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Melia Hotels i.e., Melia Hotels and Air Products go up and down completely randomly.
Pair Corralation between Melia Hotels and Air Products
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.96 times more return on investment than Air Products. However, Melia Hotels is 1.05 times less risky than Air Products. It trades about 0.09 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.05 per unit of risk. 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 |
Melia Hotels vs. Air Products Chemicals
Performance |
| Timeline |
| Melia Hotels |
| Air Products Chemicals |
Melia Hotels and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Air Products
The main advantage of trading using opposite Melia Hotels and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Melia Hotels vs. Spirent Communications plc | Melia Hotels vs. Global Net Lease | Melia Hotels vs. Gamma Communications PLC | Melia Hotels vs. Universal Music Group |
| Air Products vs. National Beverage Corp | Air Products vs. Associated British Foods | Air Products vs. CAP LEASE AVIATION | Air Products vs. Geely Automobile 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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