Correlation Between Meliá Hotels and Carsales
Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Carsales 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 Carsales 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 Carsales, you can compare the effects of market volatilities on Meliá Hotels and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Carsales.
Diversification Opportunities for Meliá Hotels and Carsales
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Meliá and Carsales is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Carsales go up and down completely randomly.
Pair Corralation between Meliá Hotels and Carsales
Assuming the 90 days horizon Meli Hotels International is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 2.25 times less risky than Carsales. The stock trades about -0.38 of its potential returns per unit of risk. The Carsales is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,220 in Carsales on October 24, 2024 and sell it today you would earn a total of 80.00 from holding Carsales or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meli Hotels International vs. Carsales
Performance |
| Timeline |
| Meli Hotels International |
| Carsales |
Meliá Hotels and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meliá Hotels and Carsales
The main advantage of trading using opposite Meliá Hotels and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Meliá Hotels vs. DFS Furniture PLC | Meliá Hotels vs. Corporate Office Properties | Meliá Hotels vs. MOBILE FACTORY INC | Meliá Hotels vs. Infrastrutture Wireless Italiane |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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