Correlation Between MELIA HOTELS and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and HSBC Holdings 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 HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and HSBC Holdings plc, you can compare the effects of market volatilities on MELIA HOTELS and HSBC Holdings 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 HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and HSBC Holdings.
Diversification Opportunities for MELIA HOTELS and HSBC Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MELIA and HSBC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and HSBC Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings plc 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 HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings plc has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and HSBC Holdings go up and down completely randomly.
Pair Corralation between MELIA HOTELS and HSBC Holdings
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.23 times less return on investment than HSBC Holdings. In addition to that, MELIA HOTELS is 1.22 times more volatile than HSBC Holdings plc. It trades about 0.06 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.08 per unit of volatility. If you would invest 2,382 in HSBC Holdings plc on September 14, 2024 and sell it today you would earn a total of 2,158 from holding HSBC Holdings plc or generate 90.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. HSBC Holdings plc
Performance |
| Timeline |
| MELIA HOTELS |
| HSBC Holdings plc |
MELIA HOTELS and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and HSBC Holdings
The main advantage of trading using opposite MELIA HOTELS and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, HSBC Holdings 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 HSBC Holdings will offset losses from the drop in HSBC Holdings' long position.| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
| HSBC Holdings vs. Motorcar Parts of | HSBC Holdings vs. NH HOTEL GROUP | HSBC Holdings vs. InterContinental Hotels Group | HSBC Holdings vs. MELIA HOTELS |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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