Correlation Between Live Nation and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Live Nation 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 Live Nation and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Live Nation Entertainment and Meli Hotels International, you can compare the effects of market volatilities on Live Nation 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 Live Nation with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Nation and Meliá Hotels.
Diversification Opportunities for Live Nation and Meliá Hotels
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Live and Meliá is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Live Nation Entertainment 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 Live Nation 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 Live Nation Entertainment 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 Live Nation i.e., Live Nation and Meliá Hotels go up and down completely randomly.
Pair Corralation between Live Nation and Meliá Hotels
Assuming the 90 days horizon Live Nation Entertainment is expected to under-perform the Meliá Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Live Nation Entertainment is 1.68 times less risky than Meliá Hotels. The stock trades about -0.07 of its potential returns per unit of risk. The Meli Hotels International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 718.00 in Meli Hotels International on October 12, 2024 and sell it today you would earn a total of 6.00 from holding Meli Hotels International or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Live Nation Entertainment vs. Meli Hotels International
Performance |
| Timeline |
| Live Nation Entertainment |
| Meli Hotels International |
Live Nation and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Nation and Meliá Hotels
The main advantage of trading using opposite Live Nation and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Nation 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.| Live Nation vs. National Beverage Corp | Live Nation vs. CHEMICAL INDUSTRIES | Live Nation vs. Soken Chemical Engineering | Live Nation vs. INDOFOOD AGRI RES |
| Meliá Hotels vs. PRECISION DRILLING P | Meliá Hotels vs. BORR DRILLING NEW | Meliá Hotels vs. Live Nation Entertainment | Meliá Hotels vs. Pembina Pipeline Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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