Correlation Between Melia Hotels and Playtech Plc
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Playtech 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 Playtech 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 Playtech Plc, you can compare the effects of market volatilities on Melia Hotels and Playtech 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Playtech Plc.
Diversification Opportunities for Melia Hotels and Playtech Plc
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Melia and Playtech is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Playtech Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech Plc has no effect on the direction of Melia Hotels i.e., Melia Hotels and Playtech Plc go up and down completely randomly.
Pair Corralation between Melia Hotels and Playtech Plc
Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.83 times less return on investment than Playtech Plc. But when comparing it to its historical volatility, Melia Hotels is 1.32 times less risky than Playtech Plc. It trades about 0.07 of its potential returns per unit of risk. Playtech Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 43,320 in Playtech Plc on September 14, 2024 and sell it today you would earn a total of 30,680 from holding Playtech Plc or generate 70.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Melia Hotels vs. Playtech Plc
Performance |
| Timeline |
| Melia Hotels |
| Playtech Plc |
Melia Hotels and Playtech Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Playtech Plc
The main advantage of trading using opposite Melia Hotels and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Playtech 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 Playtech Plc will offset losses from the drop in Playtech Plc'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 |
| Playtech Plc vs. Kinnevik Investment AB | Playtech Plc vs. Oakley Capital Investments | Playtech Plc vs. FC Investment Trust | Playtech Plc vs. United Utilities Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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