Correlation Between Schroders Investment and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Schroders Investment 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 Schroders Investment and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schroders Investment Trusts and Melia Hotels, you can compare the effects of market volatilities on Schroders Investment 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 Schroders Investment with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schroders Investment and Melia Hotels.
Diversification Opportunities for Schroders Investment and Melia Hotels
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Schroders and Melia is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Schroders Investment Trusts and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Schroders Investment 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 Schroders Investment Trusts 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 Schroders Investment i.e., Schroders Investment and Melia Hotels go up and down completely randomly.
Pair Corralation between Schroders Investment and Melia Hotels
Assuming the 90 days trading horizon Schroders Investment Trusts is expected to generate 0.73 times more return on investment than Melia Hotels. However, Schroders Investment Trusts is 1.37 times less risky than Melia Hotels. It trades about 0.12 of its potential returns per unit of risk. Melia Hotels is currently generating about -0.1 per unit of risk. If you would invest 48,100 in Schroders Investment Trusts on November 3, 2024 and sell it today you would earn a total of 1,100 from holding Schroders Investment Trusts or generate 2.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schroders Investment Trusts vs. Melia Hotels
Performance |
| Timeline |
| Schroders Investment |
| Melia Hotels |
Schroders Investment and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schroders Investment and Melia Hotels
The main advantage of trading using opposite Schroders Investment and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schroders Investment 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.| Schroders Investment vs. Summit Materials Cl | Schroders Investment vs. Host Hotels Resorts | Schroders Investment vs. Check Point Software | Schroders Investment vs. Compagnie Plastic Omnium |
| Melia Hotels vs. Spirent Communications plc | Melia Hotels vs. Global Net Lease | Melia Hotels vs. Gamma Communications PLC | Melia Hotels vs. Universal Music Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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