Correlation Between MELIA HOTELS and Alumil Aluminium
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Alumil Aluminium 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 Alumil Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Alumil Aluminium Industry, you can compare the effects of market volatilities on MELIA HOTELS and Alumil Aluminium 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 Alumil Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Alumil Aluminium.
Diversification Opportunities for MELIA HOTELS and Alumil Aluminium
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MELIA and Alumil is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Alumil Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Aluminium Industry 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 Alumil Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Aluminium Industry has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Alumil Aluminium go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Alumil Aluminium
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 3.23 times less return on investment than Alumil Aluminium. But when comparing it to its historical volatility, MELIA HOTELS is 1.03 times less risky than Alumil Aluminium. It trades about 0.11 of its potential returns per unit of risk. Alumil Aluminium Industry is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 281.00 in Alumil Aluminium Industry on September 12, 2024 and sell it today you would earn a total of 131.00 from holding Alumil Aluminium Industry or generate 46.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
MELIA HOTELS vs. Alumil Aluminium Industry
Performance |
| Timeline |
| MELIA HOTELS |
| Alumil Aluminium Industry |
MELIA HOTELS and Alumil Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Alumil Aluminium
The main advantage of trading using opposite MELIA HOTELS and Alumil Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Alumil Aluminium 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 Alumil Aluminium will offset losses from the drop in Alumil Aluminium's long position.| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
| Alumil Aluminium vs. IDP EDUCATION LTD | Alumil Aluminium vs. TAL Education Group | Alumil Aluminium vs. G8 EDUCATION | Alumil Aluminium vs. Boyd Gaming |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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