Correlation Between MT Bank and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both MT Bank 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 MT Bank and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank Corp and MELIA HOTELS, you can compare the effects of market volatilities on MT Bank 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 MT Bank with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and MELIA HOTELS.
Diversification Opportunities for MT Bank and MELIA HOTELS
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MTZ and MELIA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and MT Bank 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 MT Bank Corp 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 MT Bank i.e., MT Bank and MELIA HOTELS go up and down completely randomly.
Pair Corralation between MT Bank and MELIA HOTELS
Assuming the 90 days horizon MT Bank Corp is expected to under-perform the MELIA HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, MT Bank Corp is 1.78 times less risky than MELIA HOTELS. The stock trades about -0.11 of its potential returns per unit of risk. The MELIA HOTELS is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 721.00 in MELIA HOTELS on September 13, 2024 and sell it today you would lose (18.00) from holding MELIA HOTELS or give up 2.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
MT Bank Corp vs. MELIA HOTELS
Performance |
| Timeline |
| MT Bank Corp |
| MELIA HOTELS |
MT Bank and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and MELIA HOTELS
The main advantage of trading using opposite MT Bank and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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.| MT Bank vs. KINGBOARD CHEMICAL | MT Bank vs. CHEMICAL INDUSTRIES | MT Bank vs. SEKISUI CHEMICAL | MT Bank vs. X FAB Silicon Foundries |
| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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