Correlation Between MELIA HOTELS and ECHO INVESTMENT
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and ECHO INVESTMENT 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 ECHO INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on MELIA HOTELS and ECHO INVESTMENT 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 ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and ECHO INVESTMENT.
Diversification Opportunities for MELIA HOTELS and ECHO INVESTMENT
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MELIA and ECHO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY 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 ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and ECHO INVESTMENT go up and down completely randomly.
Pair Corralation between MELIA HOTELS and ECHO INVESTMENT
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 3.8 times less return on investment than ECHO INVESTMENT. But when comparing it to its historical volatility, MELIA HOTELS is 1.2 times less risky than ECHO INVESTMENT. It trades about 0.02 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 53.00 in ECHO INVESTMENT ZY on November 28, 2024 and sell it today you would earn a total of 47.00 from holding ECHO INVESTMENT ZY or generate 88.68% 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. ECHO INVESTMENT ZY
Performance |
| Timeline |
| MELIA HOTELS |
| ECHO INVESTMENT ZY |
MELIA HOTELS and ECHO INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and ECHO INVESTMENT
The main advantage of trading using opposite MELIA HOTELS and ECHO INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, ECHO INVESTMENT 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 ECHO INVESTMENT will offset losses from the drop in ECHO INVESTMENT's long position.| MELIA HOTELS vs. Arrow Electronics | MELIA HOTELS vs. PARKEN SPORT ENT | MELIA HOTELS vs. Nucletron Electronic Aktiengesellschaft | MELIA HOTELS vs. Methode Electronics |
| ECHO INVESTMENT vs. Aedas Homes SA | ECHO INVESTMENT vs. OFFICE DEPOT | ECHO INVESTMENT vs. Grupo Carso SAB | ECHO INVESTMENT vs. Canadian Utilities Limited |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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