Correlation Between MELIA HOTELS and Nestl SA
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Nestl SA 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 Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Nestl SA, you can compare the effects of market volatilities on MELIA HOTELS and Nestl SA 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 Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Nestl SA.
Diversification Opportunities for MELIA HOTELS and Nestl SA
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MELIA and Nestl is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA 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 Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Nestl SA go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Nestl SA
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.76 times more return on investment than Nestl SA. However, MELIA HOTELS is 1.76 times more volatile than Nestl SA. It trades about 0.04 of its potential returns per unit of risk. Nestl SA is currently generating about -0.03 per unit of risk. If you would invest 491.00 in MELIA HOTELS on September 3, 2024 and sell it today you would earn a total of 195.00 from holding MELIA HOTELS or generate 39.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. Nestl SA
Performance |
| Timeline |
| MELIA HOTELS |
| Nestl SA |
MELIA HOTELS and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Nestl SA
The main advantage of trading using opposite MELIA HOTELS and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Nestl SA 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 Nestl SA will offset losses from the drop in Nestl SA's long position.| MELIA HOTELS vs. TOTAL GABON | MELIA HOTELS vs. Walgreens Boots Alliance | MELIA HOTELS vs. Peak Resources Limited |
| Nestl SA vs. Southwest Airlines Co | Nestl SA vs. Clean Energy Fuels | Nestl SA vs. WILLIS LEASE FIN | Nestl SA vs. UNITED RENTALS |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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