Correlation Between Melia Hotels and Prudential Plc
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Prudential Plc 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 Prudential Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Prudential plc, you can compare the effects of market volatilities on Melia Hotels and Prudential Plc 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 Prudential Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Prudential Plc.
Diversification Opportunities for Melia Hotels and Prudential Plc
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Melia and Prudential is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc 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 Prudential Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential plc has no effect on the direction of Melia Hotels i.e., Melia Hotels and Prudential Plc go up and down completely randomly.
Pair Corralation between Melia Hotels and Prudential Plc
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.49 times more return on investment than Prudential Plc. However, Melia Hotels is 2.04 times less risky than Prudential Plc. It trades about 0.05 of its potential returns per unit of risk. Prudential plc is currently generating about 0.01 per unit of risk. If you would invest 655.00 in Melia Hotels on September 3, 2024 and sell it today you would earn a total of 22.00 from holding Melia Hotels or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Prudential plc
Performance |
| Timeline |
| Melia Hotels |
| Prudential plc |
Melia Hotels and Prudential Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Prudential Plc
The main advantage of trading using opposite Melia Hotels and Prudential Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Prudential Plc 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 Prudential Plc will offset losses from the drop in Prudential Plc's long position.| Melia Hotels vs. Catalyst Media Group | Melia Hotels vs. CATLIN GROUP | Melia Hotels vs. Magnora ASA | Melia Hotels vs. RTW Venture Fund |
| Prudential Plc vs. Automatic Data Processing | Prudential Plc vs. Orient Telecoms | Prudential Plc vs. Batm Advanced Communications | Prudential Plc vs. GlobalData 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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