Correlation Between Melia Hotels and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Summit Materials 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 Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Summit Materials Cl, you can compare the effects of market volatilities on Melia Hotels and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Summit Materials.
Diversification Opportunities for Melia Hotels and Summit Materials
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Melia and Summit is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Melia Hotels i.e., Melia Hotels and Summit Materials go up and down completely randomly.
Pair Corralation between Melia Hotels and Summit Materials
Assuming the 90 days trading horizon Melia Hotels is expected to under-perform the Summit Materials. But the stock apears to be less risky and, when comparing its historical volatility, Melia Hotels is 1.95 times less risky than Summit Materials. The stock trades about -0.07 of its potential returns per unit of risk. The Summit Materials Cl is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,691 in Summit Materials Cl on September 4, 2024 and sell it today you would earn a total of 405.00 from holding Summit Materials Cl or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Summit Materials Cl
Performance |
| Timeline |
| Melia Hotels |
| Summit Materials |
Melia Hotels and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Summit Materials
The main advantage of trading using opposite Melia Hotels and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Melia Hotels vs. Samsung Electronics Co | Melia Hotels vs. Samsung Electronics Co | Melia Hotels vs. Hyundai Motor | Melia Hotels vs. Toyota Motor Corp |
| Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Hyundai Motor | Summit Materials vs. Toyota Motor Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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