Correlation Between Meliá Hotels and ELECTRONIC ARTS
Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and ELECTRONIC ARTS 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 ELECTRONIC ARTS 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 ELECTRONIC ARTS, you can compare the effects of market volatilities on Meliá Hotels and ELECTRONIC ARTS 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 ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and ELECTRONIC ARTS.
Diversification Opportunities for Meliá Hotels and ELECTRONIC ARTS
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Meliá and ELECTRONIC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS 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 ELECTRONIC ARTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTRONIC ARTS has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and ELECTRONIC ARTS go up and down completely randomly.
Pair Corralation between Meliá Hotels and ELECTRONIC ARTS
Assuming the 90 days horizon Meli Hotels International is expected to generate 1.15 times more return on investment than ELECTRONIC ARTS. However, Meliá Hotels is 1.15 times more volatile than ELECTRONIC ARTS. It trades about -0.37 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about -0.45 per unit of risk. If you would invest 750.00 in Meli Hotels International on October 16, 2024 and sell it today you would lose (51.00) from holding Meli Hotels International or give up 6.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meli Hotels International vs. ELECTRONIC ARTS
Performance |
| Timeline |
| Meli Hotels International |
| ELECTRONIC ARTS |
Meliá Hotels and ELECTRONIC ARTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meliá Hotels and ELECTRONIC ARTS
The main advantage of trading using opposite Meliá Hotels and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, ELECTRONIC ARTS 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 ELECTRONIC ARTS will offset losses from the drop in ELECTRONIC ARTS's long position.| Meliá Hotels vs. NXP Semiconductors NV | Meliá Hotels vs. SPECTRAL MEDICAL | Meliá Hotels vs. Nordic Semiconductor ASA | Meliá Hotels vs. Advanced Medical Solutions |
| ELECTRONIC ARTS vs. Dalata Hotel Group | ELECTRONIC ARTS vs. NH HOTEL GROUP | ELECTRONIC ARTS vs. Meli Hotels International | ELECTRONIC ARTS vs. WisdomTree Investments |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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