Correlation Between BJs Restaurants and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants 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 BJs Restaurants and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Meli Hotels International, you can compare the effects of market volatilities on BJs Restaurants 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 BJs Restaurants with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Meliá Hotels.
Diversification Opportunities for BJs Restaurants and Meliá Hotels
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BJs and Meliá is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants i.e., BJs Restaurants and Meliá Hotels go up and down completely randomly.
Pair Corralation between BJs Restaurants and Meliá Hotels
Given the investment horizon of 90 days BJs Restaurants is expected to generate 1.43 times less return on investment than Meliá Hotels. In addition to that, BJs Restaurants is 1.15 times more volatile than Meli Hotels International. It trades about 0.02 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.04 per unit of volatility. If you would invest 525.00 in Meli Hotels International on August 24, 2024 and sell it today you would earn a total of 186.00 from holding Meli Hotels International or generate 35.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.98% |
| Values | Daily Returns |
BJs Restaurants vs. Meli Hotels International
Performance |
| Timeline |
| BJs Restaurants |
| Meli Hotels International |
BJs Restaurants and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Meliá Hotels
The main advantage of trading using opposite BJs Restaurants and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants 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.| BJs Restaurants vs. Dine Brands Global | BJs Restaurants vs. Brinker International | BJs Restaurants vs. Bloomin Brands | BJs Restaurants vs. The Cheesecake Factory |
| Meliá Hotels vs. Marriott International | Meliá Hotels vs. Hilton Worldwide Holdings | Meliá Hotels vs. InterContinental Hotels Group | Meliá Hotels vs. InterContinental Hotels 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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