Correlation Between Energy Solar and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Energy Solar 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 Energy Solar and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Solar Tech and Melia Hotels, you can compare the effects of market volatilities on Energy Solar 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 Energy Solar with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Solar and Melia Hotels.
Diversification Opportunities for Energy Solar and Melia Hotels
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Melia is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Energy Solar Tech and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Energy Solar 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 Energy Solar Tech 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 Energy Solar i.e., Energy Solar and Melia Hotels go up and down completely randomly.
Pair Corralation between Energy Solar and Melia Hotels
Assuming the 90 days trading horizon Energy Solar Tech is expected to generate 1.18 times more return on investment than Melia Hotels. However, Energy Solar is 1.18 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 322.00 in Energy Solar Tech on August 28, 2024 and sell it today you would lose (16.00) from holding Energy Solar Tech or give up 4.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Solar Tech vs. Melia Hotels
Performance |
| Timeline |
| Energy Solar Tech |
| Melia Hotels |
Energy Solar and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Solar and Melia Hotels
The main advantage of trading using opposite Energy Solar and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Solar 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.| Energy Solar vs. Caixabank SA | Energy Solar vs. NH Hoteles | Energy Solar vs. Labiana Health SA | Energy Solar vs. Inhome Prime Properties |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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