Correlation Between Melia Hotels and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Chevron 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 Chevron 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 Chevron Corp, you can compare the effects of market volatilities on Melia Hotels and Chevron 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Chevron Corp.
Diversification Opportunities for Melia Hotels and Chevron Corp
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Melia and Chevron is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Melia Hotels i.e., Melia Hotels and Chevron Corp go up and down completely randomly.
Pair Corralation between Melia Hotels and Chevron Corp
Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.27 times less return on investment than Chevron Corp. But when comparing it to its historical volatility, Melia Hotels is 2.1 times less risky than Chevron Corp. It trades about 0.03 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 14,408 in Chevron Corp on October 12, 2024 and sell it today you would earn a total of 651.00 from holding Chevron Corp or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.49% |
| Values | Daily Returns |
Melia Hotels vs. Chevron Corp
Performance |
| Timeline |
| Melia Hotels |
| Chevron Corp |
Melia Hotels and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Chevron Corp
The main advantage of trading using opposite Melia Hotels and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Chevron 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.| Melia Hotels vs. MoneysupermarketCom Group PLC | Melia Hotels vs. Sparebank 1 SR | Melia Hotels vs. Erste Group Bank | Melia Hotels vs. Ameriprise Financial |
| Chevron Corp vs. Advanced Medical Solutions | Chevron Corp vs. PPHE Hotel Group | Chevron Corp vs. Dalata Hotel Group | Chevron 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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