Correlation Between Bank of America and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Bank of America and Meliá 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 Bank of America and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Meli Hotels International, you can compare the effects of market volatilities on Bank of America and Meliá 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 Bank of America with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Meliá Hotels.
Diversification Opportunities for Bank of America and Meliá Hotels
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Meliá is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International and Bank of America 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 Bank of America are associated (or correlated) with Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Bank of America i.e., Bank of America and Meliá Hotels go up and down completely randomly.
Pair Corralation between Bank of America and Meliá Hotels
If you would invest 4,262 in Bank of America on August 28, 2024 and sell it today you would earn a total of 488.00 from holding Bank of America or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Meli Hotels International
Performance |
| Timeline |
| Bank of America |
| Meli Hotels International |
Bank of America and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Meliá Hotels
The main advantage of trading using opposite Bank of America and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Meliá 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 Meliá Hotels will offset losses from the drop in Meliá Hotels' long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| Meliá Hotels vs. Marriott International | Meliá Hotels vs. Hilton Worldwide Holdings | Meliá Hotels vs. InterContinental Hotels Group | Meliá Hotels vs. Accor SA |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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