Correlation Between Snap and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Meli Hotels International, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Meliá Hotels.
Diversification Opportunities for Snap and Meliá Hotels
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Meliá is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc 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 Snap 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 Snap Inc 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 Snap i.e., Snap and Meliá Hotels go up and down completely randomly.
Pair Corralation between Snap and Meliá Hotels
Given the investment horizon of 90 days Snap Inc is expected to generate 1.76 times more return on investment than Meliá Hotels. However, Snap is 1.76 times more volatile than Meli Hotels International. It trades about 0.03 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.05 per unit of risk. If you would invest 920.00 in Snap Inc on August 31, 2024 and sell it today you would earn a total of 241.00 from holding Snap Inc or generate 26.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.9% |
| Values | Daily Returns |
Snap Inc vs. Meli Hotels International
Performance |
| Timeline |
| Snap Inc |
| Meli Hotels International |
Snap and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Meliá Hotels
The main advantage of trading using opposite Snap and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc 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.| Meliá Hotels vs. Marriott International | Meliá Hotels vs. Hilton Worldwide Holdings | Meliá Hotels vs. InterContinental Hotels Group | Meliá Hotels vs. InterContinental Hotels 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |