Correlation Between Primary Health and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Primary Health 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 Primary Health and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Primary Health Properties and Melia Hotels, you can compare the effects of market volatilities on Primary Health 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 Primary Health with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primary Health and Melia Hotels.
Diversification Opportunities for Primary Health and Melia Hotels
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Primary and Melia is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Primary Health 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 Primary Health Properties 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 Primary Health i.e., Primary Health and Melia Hotels go up and down completely randomly.
Pair Corralation between Primary Health and Melia Hotels
Assuming the 90 days trading horizon Primary Health is expected to generate 1.97 times less return on investment than Melia Hotels. But when comparing it to its historical volatility, Primary Health Properties is 1.16 times less risky than Melia Hotels. It trades about 0.06 of its potential returns per unit of risk. Melia Hotels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 684.00 in Melia Hotels on November 3, 2024 and sell it today you would earn a total of 35.00 from holding Melia Hotels or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Primary Health Properties vs. Melia Hotels
Performance |
| Timeline |
| Primary Health Properties |
| Melia Hotels |
Primary Health and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Primary Health and Melia Hotels
The main advantage of trading using opposite Primary Health and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primary Health 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' long position.| Primary Health vs. Jacquet Metal Service | Primary Health vs. GreenX Metals | Primary Health vs. Martin Marietta Materials | Primary Health vs. GoldMining |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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