Correlation Between Nike and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Meli Hotels International, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Meliá Hotels.
Diversification Opportunities for Nike and Meliá Hotels
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and Meliá is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc 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 Nike 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 Nike Inc 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 Nike i.e., Nike and Meliá Hotels go up and down completely randomly.
Pair Corralation between Nike and Meliá Hotels
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Meliá Hotels. In addition to that, Nike is 1.09 times more volatile than Meli Hotels International. It trades about -0.04 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.0 per unit of volatility. If you would invest 725.00 in Meli Hotels International on August 29, 2024 and sell it today you would lose (14.00) from holding Meli Hotels International or give up 1.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Nike Inc vs. Meli Hotels International
Performance |
| Timeline |
| Nike Inc |
| Meli Hotels International |
Nike and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Meliá Hotels
The main advantage of trading using opposite Nike and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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.The idea behind Nike Inc and Meli Hotels International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Meliá Hotels vs. Marriott International | Meliá Hotels vs. Hilton Worldwide Holdings | Meliá Hotels vs. InterContinental Hotels Group | Meliá Hotels vs. InterContinental Hotels Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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