Correlation Between Melia Hotels and Erste Group
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Erste Group 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 Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Erste Group Bank, you can compare the effects of market volatilities on Melia Hotels and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Erste Group.
Diversification Opportunities for Melia Hotels and Erste Group
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Melia and Erste is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Melia Hotels i.e., Melia Hotels and Erste Group go up and down completely randomly.
Pair Corralation between Melia Hotels and Erste Group
Assuming the 90 days trading horizon Melia Hotels is expected to generate 4.32 times less return on investment than Erste Group. In addition to that, Melia Hotels is 1.21 times more volatile than Erste Group Bank. It trades about 0.08 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.4 per unit of volatility. If you would invest 5,181 in Erste Group Bank on October 30, 2024 and sell it today you would earn a total of 996.00 from holding Erste Group Bank or generate 19.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Erste Group Bank
Performance |
| Timeline |
| Melia Hotels |
| Erste Group Bank |
Melia Hotels and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Erste Group
The main advantage of trading using opposite Melia Hotels and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.| Melia Hotels vs. Cembra Money Bank | Melia Hotels vs. MoneysupermarketCom Group PLC | Melia Hotels vs. Batm Advanced Communications | Melia Hotels vs. Spirent Communications plc |
| Erste Group vs. JB Hunt Transport | Erste Group vs. Aptitude Software Group | Erste Group vs. Axway Software SA | Erste Group vs. Alfa Financial Software |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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