Correlation Between Melia Hotels and Metrovacesa
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Metrovacesa 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 Melia Hotels and Metrovacesa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Metrovacesa SA, you can compare the effects of market volatilities on Melia Hotels and Metrovacesa 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 Melia Hotels with a short position of Metrovacesa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Metrovacesa.
Diversification Opportunities for Melia Hotels and Metrovacesa
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Melia and Metrovacesa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Metrovacesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrovacesa SA and Melia 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 Melia Hotels are associated (or correlated) with Metrovacesa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrovacesa SA has no effect on the direction of Melia Hotels i.e., Melia Hotels and Metrovacesa go up and down completely randomly.
Pair Corralation between Melia Hotels and Metrovacesa
Assuming the 90 days trading horizon Melia Hotels is expected to generate 2.3 times less return on investment than Metrovacesa. In addition to that, Melia Hotels is 1.73 times more volatile than Metrovacesa SA. It trades about 0.04 of its total potential returns per unit of risk. Metrovacesa SA is currently generating about 0.15 per unit of volatility. If you would invest 880.00 in Metrovacesa SA on September 12, 2024 and sell it today you would earn a total of 27.00 from holding Metrovacesa SA or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Metrovacesa SA
Performance |
| Timeline |
| Melia Hotels |
| Metrovacesa SA |
Melia Hotels and Metrovacesa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Metrovacesa
The main advantage of trading using opposite Melia Hotels and Metrovacesa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Metrovacesa 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 Metrovacesa will offset losses from the drop in Metrovacesa's long position.| Melia Hotels vs. International Consolidated Airlines | Melia Hotels vs. Aena SA | Melia Hotels vs. Acerinox | Melia Hotels vs. ACS Actividades de |
| Metrovacesa vs. Neinor Homes SLU | Metrovacesa vs. Merlin Properties SOCIMI | Metrovacesa vs. Atresmedia Corporacin de |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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