Correlation Between Aedas Homes and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Aedas Homes 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 Aedas Homes and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aedas Homes SL and Melia Hotels, you can compare the effects of market volatilities on Aedas Homes 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 Aedas Homes with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Melia Hotels.
Diversification Opportunities for Aedas Homes and Melia Hotels
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aedas and Melia is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Aedas Homes 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 Aedas Homes SL 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 Aedas Homes i.e., Aedas Homes and Melia Hotels go up and down completely randomly.
Pair Corralation between Aedas Homes and Melia Hotels
Assuming the 90 days trading horizon Aedas Homes SL is expected to generate 0.99 times more return on investment than Melia Hotels. However, Aedas Homes SL is 1.01 times less risky than Melia Hotels. It trades about 0.1 of its potential returns per unit of risk. Melia Hotels is currently generating about 0.04 per unit of risk. If you would invest 1,108 in Aedas Homes SL on August 30, 2024 and sell it today you would earn a total of 1,422 from holding Aedas Homes SL or generate 128.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aedas Homes SL vs. Melia Hotels
Performance |
| Timeline |
| Aedas Homes SL |
| Melia Hotels |
Aedas Homes and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aedas Homes and Melia Hotels
The main advantage of trading using opposite Aedas Homes and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes 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.The idea behind Aedas Homes SL and Melia Hotels pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Melia Hotels vs. Biotechnology Assets SA | Melia Hotels vs. Aedas Homes SL | Melia Hotels vs. Arrienda Rental Properties | Melia Hotels vs. Elaia Investment Spain |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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