Correlation Between Meliá Hotels and POSBO UNSPADRS/20YC1
Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and POSBO UNSPADRS/20YC1 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 Meliá Hotels and POSBO UNSPADRS/20YC1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meli Hotels International and POSBO UNSPADRS20YC1, you can compare the effects of market volatilities on Meliá Hotels and POSBO UNSPADRS/20YC1 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 Meliá Hotels with a short position of POSBO UNSPADRS/20YC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and POSBO UNSPADRS/20YC1.
Diversification Opportunities for Meliá Hotels and POSBO UNSPADRS/20YC1
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Meliá and POSBO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and POSBO UNSPADRS20YC1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSBO UNSPADRS/20YC1 and Meliá Hotels 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 Meli Hotels International are associated (or correlated) with POSBO UNSPADRS/20YC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSBO UNSPADRS/20YC1 has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and POSBO UNSPADRS/20YC1 go up and down completely randomly.
Pair Corralation between Meliá Hotels and POSBO UNSPADRS/20YC1
Assuming the 90 days horizon Meli Hotels International is expected to under-perform the POSBO UNSPADRS/20YC1. But the stock apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 1.51 times less risky than POSBO UNSPADRS/20YC1. The stock trades about -0.39 of its potential returns per unit of risk. The POSBO UNSPADRS20YC1 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,028 in POSBO UNSPADRS20YC1 on October 20, 2024 and sell it today you would earn a total of 62.00 from holding POSBO UNSPADRS20YC1 or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meli Hotels International vs. POSBO UNSPADRS20YC1
Performance |
| Timeline |
| Meli Hotels International |
| POSBO UNSPADRS/20YC1 |
Meliá Hotels and POSBO UNSPADRS/20YC1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meliá Hotels and POSBO UNSPADRS/20YC1
The main advantage of trading using opposite Meliá Hotels and POSBO UNSPADRS/20YC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 will offset losses from the drop in POSBO UNSPADRS/20YC1's long position.| Meliá Hotels vs. MOVIE GAMES SA | Meliá Hotels vs. GameStop Corp | Meliá Hotels vs. GungHo Online Entertainment | Meliá Hotels vs. GigaMedia |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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