Correlation Between MGIC Investment and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both MGIC Investment and MELIA HOTELS 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 MGIC Investment and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGIC Investment and MELIA HOTELS, you can compare the effects of market volatilities on MGIC Investment and MELIA HOTELS 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 MGIC Investment with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and MELIA HOTELS.
Diversification Opportunities for MGIC Investment and MELIA HOTELS
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MGIC and MELIA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and MGIC Investment 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 MGIC Investment are associated (or correlated) with MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of MGIC Investment i.e., MGIC Investment and MELIA HOTELS go up and down completely randomly.
Pair Corralation between MGIC Investment and MELIA HOTELS
Assuming the 90 days horizon MGIC Investment is expected to generate 0.69 times more return on investment than MELIA HOTELS. However, MGIC Investment is 1.45 times less risky than MELIA HOTELS. It trades about 0.11 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.06 per unit of risk. If you would invest 1,147 in MGIC Investment on September 14, 2024 and sell it today you would earn a total of 1,193 from holding MGIC Investment or generate 104.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGIC Investment vs. MELIA HOTELS
Performance |
| Timeline |
| MGIC Investment |
| MELIA HOTELS |
MGIC Investment and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGIC Investment and MELIA HOTELS
The main advantage of trading using opposite MGIC Investment and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC Investment position performs unexpectedly, MELIA HOTELS 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 MELIA HOTELS will offset losses from the drop in MELIA HOTELS's long position.| MGIC Investment vs. MELIA HOTELS | MGIC Investment vs. Xenia Hotels Resorts | MGIC Investment vs. Host Hotels Resorts | MGIC Investment vs. Park Hotels Resorts |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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