Correlation Between Citi Trends and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Citi Trends 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 Citi Trends and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citi Trends and Meli Hotels International, you can compare the effects of market volatilities on Citi Trends 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 Citi Trends with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citi Trends and Meliá Hotels.
Diversification Opportunities for Citi Trends and Meliá Hotels
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citi and Meliá is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends 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 Citi Trends 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 Citi Trends 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 Citi Trends i.e., Citi Trends and Meliá Hotels go up and down completely randomly.
Pair Corralation between Citi Trends and Meliá Hotels
Given the investment horizon of 90 days Citi Trends is expected to under-perform the Meliá Hotels. In addition to that, Citi Trends is 1.26 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 0.05 per unit of volatility. If you would invest 569.00 in Meli Hotels International on August 24, 2024 and sell it today you would earn a total of 142.00 from holding Meli Hotels International or generate 24.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.6% |
| Values | Daily Returns |
Citi Trends vs. Meli Hotels International
Performance |
| Timeline |
| Citi Trends |
| Meli Hotels International |
Citi Trends and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citi Trends and Meliá Hotels
The main advantage of trading using opposite Citi Trends and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citi Trends 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.| Citi Trends vs. JJill Inc | Citi Trends vs. Zumiez Inc | Citi Trends vs. Tillys Inc | Citi Trends vs. Duluth Holdings |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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