Correlation Between Melia Hotels and Bodegas Riojanas
Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Bodegas Riojanas 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 Bodegas Riojanas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melia Hotels and Bodegas Riojanas SA, you can compare the effects of market volatilities on Melia Hotels and Bodegas Riojanas 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 Bodegas Riojanas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Bodegas Riojanas.
Diversification Opportunities for Melia Hotels and Bodegas Riojanas
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Melia and Bodegas is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Bodegas Riojanas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodegas Riojanas 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 Bodegas Riojanas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodegas Riojanas has no effect on the direction of Melia Hotels i.e., Melia Hotels and Bodegas Riojanas go up and down completely randomly.
Pair Corralation between Melia Hotels and Bodegas Riojanas
Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.66 times more return on investment than Bodegas Riojanas. However, Melia Hotels is 1.51 times less risky than Bodegas Riojanas. It trades about -0.07 of its potential returns per unit of risk. Bodegas Riojanas SA is currently generating about -0.21 per unit of risk. If you would invest 691.00 in Melia Hotels on September 2, 2024 and sell it today you would lose (14.00) from holding Melia Hotels or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melia Hotels vs. Bodegas Riojanas SA
Performance |
| Timeline |
| Melia Hotels |
| Bodegas Riojanas |
Melia Hotels and Bodegas Riojanas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melia Hotels and Bodegas Riojanas
The main advantage of trading using opposite Melia Hotels and Bodegas Riojanas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Bodegas Riojanas 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 Bodegas Riojanas will offset losses from the drop in Bodegas Riojanas' long position.| Melia Hotels vs. International Consolidated Airlines | Melia Hotels vs. Merlin Properties SOCIMI | Melia Hotels vs. Aena SA | Melia Hotels vs. Acerinox |
| Bodegas Riojanas vs. International Consolidated Airlines | Bodegas Riojanas vs. Labiana Health SA | Bodegas Riojanas vs. Melia Hotels | Bodegas Riojanas vs. Tier1 Technology SA |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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