Correlation Between MELIA HOTELS and American Eagle
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and American Eagle 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 American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and American Eagle Outfitters, you can compare the effects of market volatilities on MELIA HOTELS and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and American Eagle.
Diversification Opportunities for MELIA HOTELS and American Eagle
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MELIA and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and American Eagle go up and down completely randomly.
Pair Corralation between MELIA HOTELS and American Eagle
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 0.68 times more return on investment than American Eagle. However, MELIA HOTELS is 1.48 times less risky than American Eagle. It trades about 0.14 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.11 per unit of risk. If you would invest 660.00 in MELIA HOTELS on August 30, 2024 and sell it today you would earn a total of 27.00 from holding MELIA HOTELS or generate 4.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. American Eagle Outfitters
Performance |
| Timeline |
| MELIA HOTELS |
| American Eagle Outfitters |
MELIA HOTELS and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and American Eagle
The main advantage of trading using opposite MELIA HOTELS and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| MELIA HOTELS vs. Sims Metal Management | MELIA HOTELS vs. PROSIEBENSAT1 MEDIADR4 | MELIA HOTELS vs. CNVISION MEDIA | MELIA HOTELS vs. Waste Management |
| American Eagle vs. PARKEN Sport Entertainment | American Eagle vs. Scandinavian Tobacco Group | American Eagle vs. JD SPORTS FASH | American Eagle vs. TOWNSQUARE MEDIA INC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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