Correlation Between MELIA HOTELS and Broadcom
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Broadcom 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 Broadcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Broadcom, you can compare the effects of market volatilities on MELIA HOTELS and Broadcom 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 Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Broadcom.
Diversification Opportunities for MELIA HOTELS and Broadcom
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MELIA and Broadcom is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom 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 Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Broadcom go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Broadcom
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 5.58 times less return on investment than Broadcom. But when comparing it to its historical volatility, MELIA HOTELS is 1.38 times less risky than Broadcom. It trades about 0.03 of its potential returns per unit of risk. Broadcom is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,343 in Broadcom on November 1, 2024 and sell it today you would earn a total of 14,303 from holding Broadcom or generate 267.7% 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. Broadcom
Performance |
| Timeline |
| MELIA HOTELS |
| Broadcom |
MELIA HOTELS and Broadcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Broadcom
The main advantage of trading using opposite MELIA HOTELS and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Broadcom 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 Broadcom will offset losses from the drop in Broadcom's long position.| MELIA HOTELS vs. AMAG Austria Metall | MELIA HOTELS vs. Aluminum of | MELIA HOTELS vs. Transport International Holdings | MELIA HOTELS vs. DAIDO METAL TD |
| Broadcom vs. Focus Home Interactive | Broadcom vs. Xenia Hotels Resorts | Broadcom vs. InterContinental Hotels Group | Broadcom vs. MELIA HOTELS |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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