Correlation Between Pembina Pipeline and Meliá Hotels

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Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline 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 Pembina Pipeline and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pembina Pipeline Corp and Meli Hotels International, you can compare the effects of market volatilities on Pembina Pipeline 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 Pembina Pipeline with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and Meliá Hotels.

Diversification Opportunities for Pembina Pipeline and Meliá Hotels

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Pembina and Meliá is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp 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 Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Meliá Hotels go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Meliá Hotels

Assuming the 90 days horizon Pembina Pipeline Corp is expected to under-perform the Meliá Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Pembina Pipeline Corp is 1.51 times less risky than Meliá Hotels. The stock trades about -0.1 of its potential returns per unit of risk. The Meli Hotels International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  718.00  in Meli Hotels International on October 12, 2024 and sell it today you would earn a total of  6.00  from holding Meli Hotels International or generate 0.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy94.44%
ValuesDaily Returns

Pembina Pipeline Corp  vs.  Meli Hotels International

 Performance 
       Timeline  
Pembina Pipeline Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
Meli Hotels International 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meliá Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pembina Pipeline and Meliá Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pembina Pipeline and Meliá Hotels

The main advantage of trading using opposite Pembina Pipeline and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline Corp 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.
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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