Correlation Between MELIA HOTELS and Sims Metal
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Sims Metal 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 Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Sims Metal Management, you can compare the effects of market volatilities on MELIA HOTELS and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Sims Metal.
Diversification Opportunities for MELIA HOTELS and Sims Metal
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MELIA and Sims is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Sims Metal go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Sims Metal
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 2.78 times less return on investment than Sims Metal. In addition to that, MELIA HOTELS is 1.33 times more volatile than Sims Metal Management. It trades about 0.05 of its total potential returns per unit of risk. Sims Metal Management is currently generating about 0.2 per unit of volatility. If you would invest 795.00 in Sims Metal Management on November 28, 2024 and sell it today you would earn a total of 40.00 from holding Sims Metal Management or generate 5.03% 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. Sims Metal Management
Performance |
| Timeline |
| MELIA HOTELS |
| Sims Metal Management |
MELIA HOTELS and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Sims Metal
The main advantage of trading using opposite MELIA HOTELS and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| MELIA HOTELS vs. Arrow Electronics | MELIA HOTELS vs. PARKEN SPORT ENT | MELIA HOTELS vs. Nucletron Electronic Aktiengesellschaft | MELIA HOTELS vs. Methode Electronics |
| Sims Metal vs. Jacquet Metal Service | Sims Metal vs. De Grey Mining | Sims Metal vs. MCEWEN MINING INC | Sims Metal vs. UNITED INTERNET N |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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