Correlation Between ITALIAN WINE and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both ITALIAN WINE 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 ITALIAN WINE and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITALIAN WINE BRANDS and MELIA HOTELS, you can compare the effects of market volatilities on ITALIAN WINE 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 ITALIAN WINE with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and MELIA HOTELS.
Diversification Opportunities for ITALIAN WINE and MELIA HOTELS
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ITALIAN and MELIA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and MELIA HOTELS go up and down completely randomly.
Pair Corralation between ITALIAN WINE and MELIA HOTELS
Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the MELIA HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 1.21 times less risky than MELIA HOTELS. The stock trades about -0.01 of its potential returns per unit of risk. The MELIA HOTELS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 666.00 in MELIA HOTELS on September 25, 2024 and sell it today you would earn a total of 67.00 from holding MELIA HOTELS or generate 10.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITALIAN WINE BRANDS vs. MELIA HOTELS
Performance |
| Timeline |
| ITALIAN WINE BRANDS |
| MELIA HOTELS |
ITALIAN WINE and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITALIAN WINE and MELIA HOTELS
The main advantage of trading using opposite ITALIAN WINE and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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.| ITALIAN WINE vs. Diageo plc | ITALIAN WINE vs. Pernod Ricard SA | ITALIAN WINE vs. Hawesko Holding AG | ITALIAN WINE vs. ANDREW PELLER LTD |
| MELIA HOTELS vs. Check Point Software | MELIA HOTELS vs. ITALIAN WINE BRANDS | MELIA HOTELS vs. Alfa Financial Software | MELIA HOTELS vs. CPU SOFTWAREHOUSE |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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