Correlation Between Meli Hotels and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Meli Hotels and Host 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 Meli Hotels and Host Hotels 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 Host Hotels Resorts, you can compare the effects of market volatilities on Meli Hotels and Host 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 Meli Hotels with a short position of Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and Host Hotels.
Diversification Opportunities for Meli Hotels and Host Hotels
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meli and Host is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts and Meli 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 Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of Meli Hotels i.e., Meli Hotels and Host Hotels go up and down completely randomly.
Pair Corralation between Meli Hotels and Host Hotels
Assuming the 90 days horizon Meli Hotels is expected to generate 2.14 times less return on investment than Host Hotels. But when comparing it to its historical volatility, Meli Hotels International is 1.51 times less risky than Host Hotels. It trades about 0.11 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,610 in Host Hotels Resorts on August 29, 2024 and sell it today you would earn a total of 120.00 from holding Host Hotels Resorts or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meli Hotels International vs. Host Hotels Resorts
Performance |
| Timeline |
| Meli Hotels International |
| Host Hotels Resorts |
Meli Hotels and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meli Hotels and Host Hotels
The main advantage of trading using opposite Meli Hotels and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meli Hotels position performs unexpectedly, Host 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 Host Hotels will offset losses from the drop in Host Hotels' long position.The idea behind Meli Hotels International and Host Hotels Resorts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Host Hotels vs. VIAPLAY GROUP AB | Host Hotels vs. CVW CLEANTECH INC | Host Hotels vs. COLUMBIA SPORTSWEAR | Host Hotels vs. ANTA SPORTS PRODUCT |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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