Correlation Between BYD and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both BYD 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 BYD and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Melia Hotels, you can compare the effects of market volatilities on BYD 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 BYD with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Melia Hotels.
Diversification Opportunities for BYD and Melia Hotels
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between BYD and Melia is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and BYD 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 BYD Co 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 BYD i.e., BYD and Melia Hotels go up and down completely randomly.
Pair Corralation between BYD and Melia Hotels
Assuming the 90 days trading horizon BYD Co is expected to generate 12.18 times more return on investment than Melia Hotels. However, BYD is 12.18 times more volatile than Melia Hotels. It trades about 0.06 of its potential returns per unit of risk. Melia Hotels is currently generating about 0.03 per unit of risk. If you would invest 3,520 in BYD Co on September 12, 2024 and sell it today you would earn a total of 40.00 from holding BYD Co or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
BYD Co vs. Melia Hotels
Performance |
| Timeline |
| BYD Co |
| Melia Hotels |
BYD and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Melia Hotels
The main advantage of trading using opposite BYD and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD 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.| BYD vs. Hochschild Mining plc | BYD vs. Bisichi Mining PLC | BYD vs. Southern Copper Corp | BYD vs. CAP LEASE AVIATION |
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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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