Correlation Between BCE and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both BCE 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 BCE and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Meli Hotels International, you can compare the effects of market volatilities on BCE 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 BCE with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Meliá Hotels.
Diversification Opportunities for BCE and Meliá Hotels
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BCE and Meliá is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc 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 BCE 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 BCE Inc 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 BCE i.e., BCE and Meliá Hotels go up and down completely randomly.
Pair Corralation between BCE and Meliá Hotels
Considering the 90-day investment horizon BCE Inc is expected to under-perform the Meliá Hotels. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.7 times less risky than Meliá Hotels. The stock trades about -0.12 of its potential returns per unit of risk. The Meli Hotels International is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 854.00 in Meli Hotels International on September 1, 2024 and sell it today you would lose (143.00) from holding Meli Hotels International or give up 16.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 92.06% |
| Values | Daily Returns |
BCE Inc vs. Meli Hotels International
Performance |
| Timeline |
| BCE Inc |
| Meli Hotels International |
BCE and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Meliá Hotels
The main advantage of trading using opposite BCE and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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.The idea behind BCE Inc and Meli Hotels International 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.| Meliá Hotels vs. Cedar Realty Trust | Meliá Hotels vs. National Beverage Corp | Meliá Hotels vs. Vita Coco | Meliá Hotels vs. Grocery Outlet Holding |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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