Correlation Between ETFS Coffee and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee 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 ETFS Coffee and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Coffee ETC and MELIA HOTELS, you can compare the effects of market volatilities on ETFS Coffee 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 ETFS Coffee with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and MELIA HOTELS.
Diversification Opportunities for ETFS Coffee and MELIA HOTELS
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ETFS and MELIA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and MELIA HOTELS go up and down completely randomly.
Pair Corralation between ETFS Coffee and MELIA HOTELS
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 25.89 times more return on investment than MELIA HOTELS. However, ETFS Coffee is 25.89 times more volatile than MELIA HOTELS. It trades about 0.06 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.02 per unit of risk. If you would invest 112.00 in ETFS Coffee ETC on September 1, 2024 and sell it today you would earn a total of 5,147 from holding ETFS Coffee ETC or generate 4595.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.42% |
| Values | Daily Returns |
ETFS Coffee ETC vs. MELIA HOTELS
Performance |
| Timeline |
| ETFS Coffee ETC |
| MELIA HOTELS |
ETFS Coffee and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and MELIA HOTELS
The main advantage of trading using opposite ETFS Coffee and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| MELIA HOTELS vs. SIVERS SEMICONDUCTORS AB | MELIA HOTELS vs. Darden Restaurants | MELIA HOTELS vs. Reliance Steel Aluminum | MELIA HOTELS vs. Q2M Managementberatung AG |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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