Correlation Between KEYBANK and Meliá Hotels

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

Diversification Opportunities for KEYBANK and Meliá Hotels

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between KEYBANK and Meliá is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding KEYBANK NATL ASSN 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 KEYBANK 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 KEYBANK NATL ASSN 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 KEYBANK i.e., KEYBANK and Meliá Hotels go up and down completely randomly.

Pair Corralation between KEYBANK and Meliá Hotels

Assuming the 90 days trading horizon KEYBANK NATL ASSN is expected to under-perform the Meliá Hotels. In addition to that, KEYBANK is 1.37 times more volatile than Meli Hotels International. It trades about -0.29 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.21 per unit of volatility. If you would invest  678.00  in Meli Hotels International on November 29, 2024 and sell it today you would earn a total of  37.00  from holding Meli Hotels International or generate 5.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy61.9%
ValuesDaily Returns

KEYBANK NATL ASSN  vs.  Meli Hotels International

 Performance 
       Timeline  
KEYBANK NATL ASSN 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days KEYBANK NATL ASSN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for KEYBANK NATL ASSN investors.
Meli Hotels International 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

KEYBANK and Meliá Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KEYBANK and Meliá Hotels

The main advantage of trading using opposite KEYBANK and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEYBANK 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.
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The idea behind KEYBANK NATL ASSN 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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