Correlation Between Melia Hotels and BHP Group
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and BHP 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 BHP 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 BHP Group Limited, you can compare the effects of market volatilities on Melia Hotels and BHP 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and BHP Group.
Diversification Opportunities for Melia Hotels and BHP Group
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Melia and BHP is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Melia Hotels i.e., Melia Hotels and BHP Group go up and down completely randomly.
Pair Corralation between Melia Hotels and BHP Group
Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.09 times more return on investment than BHP Group. However, Melia Hotels is 1.09 times more volatile than BHP Group Limited. It trades about 0.06 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.05 per unit of risk. If you would invest 614.00 in Melia Hotels on September 14, 2024 and sell it today you would earn a total of 139.00 from holding Melia Hotels or generate 22.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. BHP Group Limited
Performance |
| Timeline |
| Melia Hotels |
| BHP Group Limited |
Melia Hotels and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and BHP Group
The main advantage of trading using opposite Melia Hotels and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, BHP 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 BHP Group will offset losses from the drop in BHP Group's long position.| Melia Hotels vs. Silvercorp Metals | Melia Hotels vs. Gaztransport et Technigaz | Melia Hotels vs. Evolution Gaming Group | Melia Hotels vs. Wheaton Precious Metals |
| BHP Group vs. Check Point Software | BHP Group vs. Sabien Technology Group | BHP Group vs. Pfeiffer Vacuum Technology | BHP Group vs. MTI Wireless Edge |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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