Correlation Between Meliá Hotels and Microsoft
Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Meliá Hotels and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Microsoft.
Diversification Opportunities for Meliá Hotels and Microsoft
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Meliá and Microsoft is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Microsoft go up and down completely randomly.
Pair Corralation between Meliá Hotels and Microsoft
Assuming the 90 days horizon Meli Hotels International is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 1.66 times less risky than Microsoft. The stock trades about -0.07 of its potential returns per unit of risk. The Microsoft is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 41,070 in Microsoft on November 6, 2024 and sell it today you would lose (520.00) from holding Microsoft or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Meli Hotels International vs. Microsoft
Performance |
| Timeline |
| Meli Hotels International |
| Microsoft |
Meliá Hotels and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meliá Hotels and Microsoft
The main advantage of trading using opposite Meliá Hotels and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Meliá Hotels vs. Guidewire Software | Meliá Hotels vs. Magic Software Enterprises | Meliá Hotels vs. GBS Software AG | Meliá Hotels vs. INTERSHOP Communications Aktiengesellschaft |
| Microsoft vs. NorAm Drilling AS | Microsoft vs. Cleanaway Waste Management | Microsoft vs. Major Drilling Group | Microsoft vs. Vulcan Materials |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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