Correlation Between MELIA HOTELS and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and DAIRY FARM 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 DAIRY FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and DAIRY FARM INTL, you can compare the effects of market volatilities on MELIA HOTELS and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and DAIRY FARM.
Diversification Opportunities for MELIA HOTELS and DAIRY FARM
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MELIA and DAIRY is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and DAIRY FARM go up and down completely randomly.
Pair Corralation between MELIA HOTELS and DAIRY FARM
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.19 times more return on investment than DAIRY FARM. However, MELIA HOTELS is 1.19 times more volatile than DAIRY FARM INTL. It trades about 0.05 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about -0.04 per unit of risk. If you would invest 714.00 in MELIA HOTELS on October 9, 2024 and sell it today you would earn a total of 8.00 from holding MELIA HOTELS or generate 1.12% 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. DAIRY FARM INTL
Performance |
| Timeline |
| MELIA HOTELS |
| DAIRY FARM INTL |
MELIA HOTELS and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and DAIRY FARM
The main advantage of trading using opposite MELIA HOTELS and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| MELIA HOTELS vs. CompuGroup Medical SE | MELIA HOTELS vs. PULSION Medical Systems | MELIA HOTELS vs. SPECTRAL MEDICAL | MELIA HOTELS vs. ENVVENO MEDICAL DL 00001 |
| DAIRY FARM vs. Grupo Carso SAB | DAIRY FARM vs. CDN IMPERIAL BANK | DAIRY FARM vs. Sun Life Financial | DAIRY FARM vs. Virtu Financial |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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