Correlation Between Sumitomo Rubber and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Meliá 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 Sumitomo Rubber and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Rubber Industries and Meli Hotels International, you can compare the effects of market volatilities on Sumitomo Rubber and Meliá 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 Sumitomo Rubber with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Meliá Hotels.
Diversification Opportunities for Sumitomo Rubber and Meliá Hotels
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Meliá is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International and Sumitomo Rubber 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 Sumitomo Rubber Industries are associated (or correlated) with Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Meliá Hotels go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Meliá Hotels
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 1.41 times more return on investment than Meliá Hotels. However, Sumitomo Rubber is 1.41 times more volatile than Meli Hotels International. It trades about -0.07 of its potential returns per unit of risk. Meli Hotels International is currently generating about -0.27 per unit of risk. If you would invest 1,080 in Sumitomo Rubber Industries on October 14, 2024 and sell it today you would lose (20.00) from holding Sumitomo Rubber Industries or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Meli Hotels International
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Meli Hotels International |
Sumitomo Rubber and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Meliá Hotels
The main advantage of trading using opposite Sumitomo Rubber and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Meliá 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 Meliá Hotels will offset losses from the drop in Meliá Hotels' long position.| Sumitomo Rubber vs. Superior Plus Corp | Sumitomo Rubber vs. NMI Holdings | Sumitomo Rubber vs. SIVERS SEMICONDUCTORS AB | Sumitomo Rubber vs. Talanx AG |
| Meliá Hotels vs. Platinum Investment Management | Meliá Hotels vs. Sumitomo Rubber Industries | Meliá Hotels vs. NEWELL RUBBERMAID | Meliá Hotels vs. Rayonier Advanced Materials |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |