Correlation Between Bankinter and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Bankinter 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 Bankinter and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bankinter and Melia Hotels, you can compare the effects of market volatilities on Bankinter 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 Bankinter with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and Melia Hotels.
Diversification Opportunities for Bankinter and Melia Hotels
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bankinter and Melia is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Bankinter 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 Bankinter 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 Bankinter i.e., Bankinter and Melia Hotels go up and down completely randomly.
Pair Corralation between Bankinter and Melia Hotels
Assuming the 90 days trading horizon Bankinter is expected to generate 1.05 times more return on investment than Melia Hotels. However, Bankinter is 1.05 times more volatile than Melia Hotels. It trades about -0.01 of its potential returns per unit of risk. Melia Hotels is currently generating about -0.05 per unit of risk. If you would invest 780.00 in Bankinter on August 25, 2024 and sell it today you would lose (27.00) from holding Bankinter or give up 3.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankinter vs. Melia Hotels
Performance |
| Timeline |
| Bankinter |
| Melia Hotels |
Bankinter and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankinter and Melia Hotels
The main advantage of trading using opposite Bankinter and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankinter 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.The idea behind Bankinter and Melia Hotels 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.| Melia Hotels vs. International Consolidated Airlines | Melia Hotels vs. Merlin Properties SOCIMI | Melia Hotels vs. Aena SA | Melia Hotels vs. Acerinox |
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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