Correlation Between MELIA HOTELS and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Veolia Environnement 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 Veolia Environnement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Veolia Environnement SA, you can compare the effects of market volatilities on MELIA HOTELS and Veolia Environnement 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 Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Veolia Environnement.
Diversification Opportunities for MELIA HOTELS and Veolia Environnement
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MELIA and Veolia is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Veolia Environnement go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Veolia Environnement
Assuming the 90 days trading horizon MELIA HOTELS is expected to under-perform the Veolia Environnement. In addition to that, MELIA HOTELS is 1.97 times more volatile than Veolia Environnement SA. It trades about -0.05 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about -0.02 per unit of volatility. If you would invest 2,820 in Veolia Environnement SA on September 13, 2024 and sell it today you would lose (16.00) from holding Veolia Environnement SA or give up 0.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. Veolia Environnement SA
Performance |
| Timeline |
| MELIA HOTELS |
| Veolia Environnement |
MELIA HOTELS and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Veolia Environnement
The main advantage of trading using opposite MELIA HOTELS and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Veolia Environnement 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 Veolia Environnement will offset losses from the drop in Veolia Environnement's long position.| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
| Veolia Environnement vs. MELIA HOTELS | Veolia Environnement vs. Playa Hotels Resorts | Veolia Environnement vs. Compagnie Plastic Omnium | Veolia Environnement vs. Materialise NV |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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