Correlation Between Induction Healthcare and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Induction Healthcare 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 Induction Healthcare and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Induction Healthcare Group and Melia Hotels, you can compare the effects of market volatilities on Induction Healthcare 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 Induction Healthcare with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Induction Healthcare and Melia Hotels.
Diversification Opportunities for Induction Healthcare and Melia Hotels
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Induction and Melia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Induction Healthcare 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 Induction Healthcare Group 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 Induction Healthcare i.e., Induction Healthcare and Melia Hotels go up and down completely randomly.
Pair Corralation between Induction Healthcare and Melia Hotels
Assuming the 90 days trading horizon Induction Healthcare Group is expected to under-perform the Melia Hotels. In addition to that, Induction Healthcare is 2.45 times more volatile than Melia Hotels. It trades about -0.08 of its total potential returns per unit of risk. Melia Hotels is currently generating about 0.06 per unit of volatility. If you would invest 604.00 in Melia Hotels on September 12, 2024 and sell it today you would earn a total of 139.00 from holding Melia Hotels or generate 23.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Induction Healthcare Group vs. Melia Hotels
Performance |
| Timeline |
| Induction Healthcare |
| Melia Hotels |
Induction Healthcare and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Induction Healthcare and Melia Hotels
The main advantage of trading using opposite Induction Healthcare and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Induction Healthcare 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.| Induction Healthcare vs. Roebuck Food Group | Induction Healthcare vs. Axfood AB | Induction Healthcare vs. Virgin Wines UK | Induction Healthcare vs. Intuitive Investments Group |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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