Correlation Between Melia Hotels and Futura Medical
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Futura Medical 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 Futura Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Futura Medical, you can compare the effects of market volatilities on Melia Hotels and Futura Medical 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 Futura Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Futura Medical.
Diversification Opportunities for Melia Hotels and Futura Medical
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Melia and Futura is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Futura Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futura Medical 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 Futura Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futura Medical has no effect on the direction of Melia Hotels i.e., Melia Hotels and Futura Medical go up and down completely randomly.
Pair Corralation between Melia Hotels and Futura Medical
Assuming the 90 days trading horizon Melia Hotels is expected to generate 2.08 times less return on investment than Futura Medical. But when comparing it to its historical volatility, Melia Hotels is 2.91 times less risky than Futura Medical. It trades about 0.05 of its potential returns per unit of risk. Futura Medical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,750 in Futura Medical on September 12, 2024 and sell it today you would earn a total of 617.00 from holding Futura Medical or generate 22.44% 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. Futura Medical
Performance |
| Timeline |
| Melia Hotels |
| Futura Medical |
Melia Hotels and Futura Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Futura Medical
The main advantage of trading using opposite Melia Hotels and Futura Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Futura Medical 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 Futura Medical will offset losses from the drop in Futura Medical's long position.| Melia Hotels vs. Hong Kong Land | Melia Hotels vs. Neometals | Melia Hotels vs. Coor Service Management | Melia Hotels vs. Fidelity Sustainable USD |
| Futura Medical vs. Ryanair Holdings plc | Futura Medical vs. Delta Air Lines | Futura Medical vs. Air Products Chemicals | Futura Medical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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