Correlation Between Apple and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and MELIA HOTELS, you can compare the effects of market volatilities on Apple 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 Apple with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and MELIA HOTELS.
Diversification Opportunities for Apple and MELIA HOTELS
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and MELIA is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and Apple 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 Apple Inc 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 Apple i.e., Apple and MELIA HOTELS go up and down completely randomly.
Pair Corralation between Apple and MELIA HOTELS
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.7 times more return on investment than MELIA HOTELS. However, Apple Inc is 1.42 times less risky than MELIA HOTELS. It trades about 0.08 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.04 per unit of risk. If you would invest 13,336 in Apple Inc on August 29, 2024 and sell it today you would earn a total of 9,074 from holding Apple Inc or generate 68.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. MELIA HOTELS
Performance |
| Timeline |
| Apple Inc |
| MELIA HOTELS |
Apple and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and MELIA HOTELS
The main advantage of trading using opposite Apple and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Cellnex Telecom SA | Apple vs. Spirent Communications plc | Apple vs. Ribbon Communications | Apple vs. Perseus Mining Limited |
| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Superior Plus Corp | MELIA HOTELS vs. SIVERS SEMICONDUCTORS AB |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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