Correlation Between MELIA HOTELS and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Westinghouse Air 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 Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Westinghouse Air Brake, you can compare the effects of market volatilities on MELIA HOTELS and Westinghouse Air 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 Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Westinghouse Air.
Diversification Opportunities for MELIA HOTELS and Westinghouse Air
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MELIA and Westinghouse is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Westinghouse Air go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Westinghouse Air
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 2.18 times less return on investment than Westinghouse Air. In addition to that, MELIA HOTELS is 1.2 times more volatile than Westinghouse Air Brake. It trades about 0.11 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.29 per unit of volatility. If you would invest 14,864 in Westinghouse Air Brake on September 12, 2024 and sell it today you would earn a total of 4,311 from holding Westinghouse Air Brake or generate 29.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. Westinghouse Air Brake
Performance |
| Timeline |
| MELIA HOTELS |
| Westinghouse Air Brake |
MELIA HOTELS and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Westinghouse Air
The main advantage of trading using opposite MELIA HOTELS and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air's long position.| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
| Westinghouse Air vs. CSX Corporation | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. SIVERS SEMICONDUCTORS AB | Westinghouse Air vs. Norsk Hydro ASA |
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 CEOs Directory module to screen CEOs from public companies around the world.
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