Correlation Between Melia Hotels and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and STMicroelectronics NV, you can compare the effects of market volatilities on Melia Hotels and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and STMicroelectronics.
Diversification Opportunities for Melia Hotels and STMicroelectronics
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Melia and STMicroelectronics is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Melia Hotels i.e., Melia Hotels and STMicroelectronics go up and down completely randomly.
Pair Corralation between Melia Hotels and STMicroelectronics
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.43 times more return on investment than STMicroelectronics. However, Melia Hotels is 2.32 times less risky than STMicroelectronics. It trades about -0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.04 per unit of risk. If you would invest 686.00 in Melia Hotels on September 2, 2024 and sell it today you would lose (9.00) from holding Melia Hotels or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. STMicroelectronics NV
Performance |
| Timeline |
| Melia Hotels |
| STMicroelectronics |
Melia Hotels and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and STMicroelectronics
The main advantage of trading using opposite Melia Hotels and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Melia Hotels vs. Monster Beverage Corp | Melia Hotels vs. PureTech Health plc | Melia Hotels vs. Odfjell Drilling | Melia Hotels vs. Synthomer plc |
| STMicroelectronics vs. Thyssenkrupp AG ON | STMicroelectronics vs. Cloudcoco Group PLC | STMicroelectronics vs. Trainline Plc | STMicroelectronics vs. Diversified Energy |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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