Correlation Between Emerson Radio and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Emerson Radio and Meliá 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 Emerson Radio and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and Meli Hotels International, you can compare the effects of market volatilities on Emerson Radio and Meliá 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 Emerson Radio with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Meliá Hotels.
Diversification Opportunities for Emerson Radio and Meliá Hotels
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerson and Meliá is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International and Emerson Radio 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 Emerson Radio are associated (or correlated) with Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Emerson Radio i.e., Emerson Radio and Meliá Hotels go up and down completely randomly.
Pair Corralation between Emerson Radio and Meliá Hotels
Considering the 90-day investment horizon Emerson Radio is expected to generate 1.86 times more return on investment than Meliá Hotels. However, Emerson Radio is 1.86 times more volatile than Meli Hotels International. It trades about -0.03 of its potential returns per unit of risk. Meli Hotels International is currently generating about -0.06 per unit of risk. If you would invest 55.00 in Emerson Radio on August 30, 2024 and sell it today you would lose (12.00) from holding Emerson Radio or give up 21.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.06% |
| Values | Daily Returns |
Emerson Radio vs. Meli Hotels International
Performance |
| Timeline |
| Emerson Radio |
| Meli Hotels International |
Emerson Radio and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Radio and Meliá Hotels
The main advantage of trading using opposite Emerson Radio and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, Meliá 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 Meliá Hotels will offset losses from the drop in Meliá Hotels' long position.| Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Vizio Holding Corp | Emerson Radio vs. Turtle Beach Corp |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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