Correlation Between Meliá Hotels and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Norwegian Air 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 Norwegian Air 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 Norwegian Air Shuttle, you can compare the effects of market volatilities on Meliá Hotels and Norwegian Air 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 Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Norwegian Air.
Diversification Opportunities for Meliá Hotels and Norwegian Air
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Meliá and Norwegian is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle 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 Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Norwegian Air go up and down completely randomly.
Pair Corralation between Meliá Hotels and Norwegian Air
Assuming the 90 days horizon Meli Hotels International is expected to generate 0.58 times more return on investment than Norwegian Air. However, Meli Hotels International is 1.72 times less risky than Norwegian Air. It trades about 0.01 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.11 per unit of risk. If you would invest 724.00 in Meli Hotels International on November 9, 2024 and sell it today you would earn a total of 0.00 from holding Meli Hotels International or generate 0.0% 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. Norwegian Air Shuttle
Performance |
| Timeline |
| Meli Hotels International |
| Norwegian Air Shuttle |
Meliá Hotels and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meliá Hotels and Norwegian Air
The main advantage of trading using opposite Meliá Hotels and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| Meliá Hotels vs. GigaMedia | Meliá Hotels vs. Flutter Entertainment PLC | Meliá Hotels vs. 24SEVENOFFICE GROUP AB | Meliá Hotels vs. CLEAN ENERGY FUELS |
| Norwegian Air vs. TROPHY GAMES DEV | Norwegian Air vs. Hochschild Mining plc | Norwegian Air vs. BAKED GAMES SA | Norwegian Air vs. Boyd Gaming |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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