Correlation Between London Security and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both London Security 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 London Security and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Melia Hotels, you can compare the effects of market volatilities on London Security 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 London Security with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Melia Hotels.
Diversification Opportunities for London Security and Melia Hotels
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between London and Melia is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and London Security 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 London Security Plc 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 London Security i.e., London Security and Melia Hotels go up and down completely randomly.
Pair Corralation between London Security and Melia Hotels
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.79 times more return on investment than Melia Hotels. However, London Security Plc is 1.27 times less risky than Melia Hotels. It trades about 0.06 of its potential returns per unit of risk. Melia Hotels is currently generating about -0.02 per unit of risk. If you would invest 294,207 in London Security Plc on September 3, 2024 and sell it today you would earn a total of 30,793 from holding London Security Plc or generate 10.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Melia Hotels
Performance |
| Timeline |
| London Security Plc |
| Melia Hotels |
London Security and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Melia Hotels
The main advantage of trading using opposite London Security and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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.| London Security vs. Griffin Mining | London Security vs. Lundin Mining Corp | London Security vs. Veolia Environnement VE | London Security vs. Caledonia Mining |
| Melia Hotels vs. Catalyst Media Group | Melia Hotels vs. CATLIN GROUP | Melia Hotels vs. Magnora ASA | Melia Hotels vs. RTW Venture Fund |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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