Correlation Between BHP Group and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both BHP Group 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 BHP Group and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Melia Hotels, you can compare the effects of market volatilities on BHP Group 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 BHP Group with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Melia Hotels.
Diversification Opportunities for BHP Group and Melia Hotels
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BHP and Melia is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and BHP Group 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 BHP Group Limited 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 BHP Group i.e., BHP Group and Melia Hotels go up and down completely randomly.
Pair Corralation between BHP Group and Melia Hotels
Assuming the 90 days trading horizon BHP Group is expected to generate 4.16 times less return on investment than Melia Hotels. But when comparing it to its historical volatility, BHP Group Limited is 1.17 times less risky than Melia Hotels. It trades about 0.03 of its potential returns per unit of risk. Melia Hotels is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 730.00 in Melia Hotels on September 14, 2024 and sell it today you would earn a total of 23.00 from holding Melia Hotels or generate 3.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Melia Hotels
Performance |
| Timeline |
| BHP Group Limited |
| Melia Hotels |
BHP Group and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Melia Hotels
The main advantage of trading using opposite BHP Group and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group 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.| BHP Group vs. Check Point Software | BHP Group vs. Sabien Technology Group | BHP Group vs. Pfeiffer Vacuum Technology | BHP Group vs. MTI Wireless Edge |
| Melia Hotels vs. Silvercorp Metals | Melia Hotels vs. Gaztransport et Technigaz | Melia Hotels vs. Evolution Gaming Group | Melia Hotels vs. Wheaton Precious Metals |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |