Correlation Between Constellation Software and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both Constellation Software 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 Constellation Software and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and MELIA HOTELS, you can compare the effects of market volatilities on Constellation Software 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 Constellation Software with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and MELIA HOTELS.
Diversification Opportunities for Constellation Software and MELIA HOTELS
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Constellation and MELIA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and Constellation Software 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 Constellation Software 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 Constellation Software i.e., Constellation Software and MELIA HOTELS go up and down completely randomly.
Pair Corralation between Constellation Software and MELIA HOTELS
Assuming the 90 days trading horizon Constellation Software is expected to generate 0.6 times more return on investment than MELIA HOTELS. However, Constellation Software is 1.67 times less risky than MELIA HOTELS. It trades about 0.13 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.05 per unit of risk. If you would invest 143,435 in Constellation Software on September 12, 2024 and sell it today you would earn a total of 172,565 from holding Constellation Software or generate 120.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Software vs. MELIA HOTELS
Performance |
| Timeline |
| Constellation Software |
| MELIA HOTELS |
Constellation Software and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Software and MELIA HOTELS
The main advantage of trading using opposite Constellation Software and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software 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's long position.| Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc |
| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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