Correlation Between Starbucks and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Starbucks 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 Starbucks and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Meli Hotels International, you can compare the effects of market volatilities on Starbucks 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 Starbucks with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Meliá Hotels.
Diversification Opportunities for Starbucks and Meliá Hotels
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Starbucks and Meliá is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks 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 Starbucks 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 Starbucks 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 Starbucks i.e., Starbucks and Meliá Hotels go up and down completely randomly.
Pair Corralation between Starbucks and Meliá Hotels
Given the investment horizon of 90 days Starbucks is expected to generate 1.59 times more return on investment than Meliá Hotels. However, Starbucks is 1.59 times more volatile than Meli Hotels International. It trades about 0.33 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.21 per unit of risk. If you would invest 9,948 in Starbucks on November 28, 2024 and sell it today you would earn a total of 1,371 from holding Starbucks or generate 13.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. Meli Hotels International
Performance |
| Timeline |
| Starbucks |
| Meli Hotels International |
Starbucks and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Meliá Hotels
The main advantage of trading using opposite Starbucks and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks 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.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza Common | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| Meliá Hotels vs. Allegiant Travel | Meliá Hotels vs. Titan Machinery | Meliá Hotels vs. Arhaus Inc | Meliá Hotels vs. American Airlines 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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