Correlation Between Air Transport and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and MELIA HOTELS, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and MELIA HOTELS.
Diversification Opportunities for Air Transport and MELIA HOTELS
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and MELIA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and MELIA HOTELS go up and down completely randomly.
Pair Corralation between Air Transport and MELIA HOTELS
Assuming the 90 days horizon Air Transport Services is expected to generate 0.3 times more return on investment than MELIA HOTELS. However, Air Transport Services is 3.37 times less risky than MELIA HOTELS. It trades about 0.15 of its potential returns per unit of risk. MELIA HOTELS is currently generating about -0.05 per unit of risk. If you would invest 2,060 in Air Transport Services on September 13, 2024 and sell it today you would earn a total of 40.00 from holding Air Transport Services or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. MELIA HOTELS
Performance |
| Timeline |
| Air Transport Services |
| MELIA HOTELS |
Air Transport and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and MELIA HOTELS
The main advantage of trading using opposite Air Transport and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. Aena SME SA | Air Transport vs. Superior Plus Corp | Air Transport vs. SIVERS SEMICONDUCTORS AB | Air Transport vs. Norsk Hydro ASA |
| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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