Correlation Between Melia Hotels and Capital Drilling
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Capital Drilling 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 Capital Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Capital Drilling, you can compare the effects of market volatilities on Melia Hotels and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Capital Drilling.
Diversification Opportunities for Melia Hotels and Capital Drilling
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Melia and Capital is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Melia Hotels i.e., Melia Hotels and Capital Drilling go up and down completely randomly.
Pair Corralation between Melia Hotels and Capital Drilling
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.83 times more return on investment than Capital Drilling. However, Melia Hotels is 1.21 times less risky than Capital Drilling. It trades about 0.07 of its potential returns per unit of risk. Capital Drilling is currently generating about 0.0 per unit of risk. If you would invest 592.00 in Melia Hotels on September 24, 2024 and sell it today you would earn a total of 153.00 from holding Melia Hotels or generate 25.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Capital Drilling
Performance |
| Timeline |
| Melia Hotels |
| Capital Drilling |
Melia Hotels and Capital Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Capital Drilling
The main advantage of trading using opposite Melia Hotels and Capital Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Capital Drilling 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 Capital Drilling will offset losses from the drop in Capital Drilling's long position.| Melia Hotels vs. Uniper SE | Melia Hotels vs. Mulberry Group PLC | Melia Hotels vs. London Security Plc | Melia Hotels vs. Triad Group PLC |
| Capital Drilling vs. Zoom Video Communications | Capital Drilling vs. Enbridge | Capital Drilling vs. Endo International PLC | Capital Drilling vs. XLMedia PLC |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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