Correlation Between USWE SPORTS and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both USWE SPORTS 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 USWE SPORTS and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USWE SPORTS AB and MELIA HOTELS, you can compare the effects of market volatilities on USWE SPORTS 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 USWE SPORTS with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and MELIA HOTELS.
Diversification Opportunities for USWE SPORTS and MELIA HOTELS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USWE and MELIA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and USWE SPORTS 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 USWE SPORTS AB 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 USWE SPORTS i.e., USWE SPORTS and MELIA HOTELS go up and down completely randomly.
Pair Corralation between USWE SPORTS and MELIA HOTELS
Assuming the 90 days horizon USWE SPORTS AB is expected to generate 1.8 times more return on investment than MELIA HOTELS. However, USWE SPORTS is 1.8 times more volatile than MELIA HOTELS. It trades about 0.08 of its potential returns per unit of risk. MELIA HOTELS is currently generating about -0.11 per unit of risk. If you would invest 73.00 in USWE SPORTS AB on October 13, 2024 and sell it today you would earn a total of 2.00 from holding USWE SPORTS AB or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
USWE SPORTS AB vs. MELIA HOTELS
Performance |
| Timeline |
| USWE SPORTS AB |
| MELIA HOTELS |
USWE SPORTS and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USWE SPORTS and MELIA HOTELS
The main advantage of trading using opposite USWE SPORTS and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USWE SPORTS 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's long position.| USWE SPORTS vs. HK Electric Investments | USWE SPORTS vs. SK TELECOM TDADR | USWE SPORTS vs. ecotel communication ag | USWE SPORTS vs. Canadian Utilities Limited |
| MELIA HOTELS vs. Yanzhou Coal Mining | MELIA HOTELS vs. USWE SPORTS AB | MELIA HOTELS vs. Playtech plc | MELIA HOTELS vs. Endeavour Mining PLC |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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