Correlation Between Flow Traders and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Flow Traders and Melia Hotels 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 Flow Traders and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flow Traders NV and Melia Hotels, you can compare the effects of market volatilities on Flow Traders and Melia Hotels 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 Flow Traders with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Traders and Melia Hotels.
Diversification Opportunities for Flow Traders and Melia Hotels
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Flow and Melia is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Flow Traders NV and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Flow Traders 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 Flow Traders NV are associated (or correlated) with Melia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melia Hotels has no effect on the direction of Flow Traders i.e., Flow Traders and Melia Hotels go up and down completely randomly.
Pair Corralation between Flow Traders and Melia Hotels
Assuming the 90 days trading horizon Flow Traders NV is expected to under-perform the Melia Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Flow Traders NV is 1.39 times less risky than Melia Hotels. The stock trades about -0.01 of its potential returns per unit of risk. The Melia Hotels is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 728.00 in Melia Hotels on September 13, 2024 and sell it today you would earn a total of 25.00 from holding Melia Hotels or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flow Traders NV vs. Melia Hotels
Performance |
| Timeline |
| Flow Traders NV |
| Melia Hotels |
Flow Traders and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flow Traders and Melia Hotels
The main advantage of trading using opposite Flow Traders and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flow Traders position performs unexpectedly, Melia Hotels 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 Melia Hotels will offset losses from the drop in Melia Hotels' long position.| Flow Traders vs. Beeks Trading | Flow Traders vs. Lowland Investment Co | Flow Traders vs. Sydbank | Flow Traders vs. Take Two Interactive Software |
| Melia Hotels vs. Silvercorp Metals | Melia Hotels vs. Gaztransport et Technigaz | Melia Hotels vs. Evolution Gaming Group | Melia Hotels vs. Wheaton Precious Metals |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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