Correlation Between Sabre Insurance and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Sabre Insurance 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 Sabre Insurance and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sabre Insurance Group and Melia Hotels, you can compare the effects of market volatilities on Sabre Insurance 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 Sabre Insurance with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabre Insurance and Melia Hotels.
Diversification Opportunities for Sabre Insurance and Melia Hotels
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sabre and Melia is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and Melia Hotels go up and down completely randomly.
Pair Corralation between Sabre Insurance and Melia Hotels
Assuming the 90 days trading horizon Sabre Insurance Group is expected to generate 1.13 times more return on investment than Melia Hotels. However, Sabre Insurance is 1.13 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 0.01 per unit of risk. If you would invest 13,240 in Sabre Insurance Group on October 11, 2024 and sell it today you would earn a total of 460.00 from holding Sabre Insurance Group or generate 3.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sabre Insurance Group vs. Melia Hotels
Performance |
| Timeline |
| Sabre Insurance Group |
| Melia Hotels |
Sabre Insurance and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sabre Insurance and Melia Hotels
The main advantage of trading using opposite Sabre Insurance and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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.| Sabre Insurance vs. Alien Metals | Sabre Insurance vs. GreenX Metals | Sabre Insurance vs. Dairy Farm International | Sabre Insurance vs. First Class Metals |
| Melia Hotels vs. Host Hotels Resorts | Melia Hotels vs. Delta Air Lines | Melia Hotels vs. Live Nation Entertainment | Melia Hotels vs. Wizz Air Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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