Correlation Between MELIA HOTELS and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Iridium Communications, you can compare the effects of market volatilities on MELIA HOTELS and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Iridium Communications.
Diversification Opportunities for MELIA HOTELS and Iridium Communications
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MELIA and Iridium is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Iridium Communications go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Iridium Communications
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 0.89 times more return on investment than Iridium Communications. However, MELIA HOTELS is 1.12 times less risky than Iridium Communications. It trades about -0.01 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.09 per unit of risk. If you would invest 724.00 in MELIA HOTELS on November 9, 2024 and sell it today you would lose (7.00) from holding MELIA HOTELS or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. Iridium Communications
Performance |
| Timeline |
| MELIA HOTELS |
| Iridium Communications |
MELIA HOTELS and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Iridium Communications
The main advantage of trading using opposite MELIA HOTELS and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| MELIA HOTELS vs. ALBIS LEASING AG | MELIA HOTELS vs. FIRST SHIP LEASE | MELIA HOTELS vs. Sunny Optical Technology | MELIA HOTELS vs. Align Technology |
| Iridium Communications vs. STORE ELECTRONIC | Iridium Communications vs. DAIRY FARM INTL | Iridium Communications vs. TITAN MACHINERY | Iridium Communications vs. Arrow Electronics |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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