Correlation Between CARSALES and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both CARSALES 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 CARSALES and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and Meli Hotels International, you can compare the effects of market volatilities on CARSALES 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 CARSALES with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALES and Meliá Hotels.
Diversification Opportunities for CARSALES and Meliá Hotels
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CARSALES and Meliá is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM 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 CARSALES 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 CARSALESCOM 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 CARSALES i.e., CARSALES and Meliá Hotels go up and down completely randomly.
Pair Corralation between CARSALES and Meliá Hotels
Assuming the 90 days trading horizon CARSALESCOM is expected to under-perform the Meliá Hotels. But the stock apears to be less risky and, when comparing its historical volatility, CARSALESCOM is 1.03 times less risky than Meliá Hotels. The stock trades about -0.53 of its potential returns per unit of risk. The Meli Hotels International is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 725.00 in Meli Hotels International on December 9, 2024 and sell it today you would lose (7.00) from holding Meli Hotels International or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CARSALESCOM vs. Meli Hotels International
Performance |
| Timeline |
| CARSALESCOM |
| Meli Hotels International |
CARSALES and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARSALES and Meliá Hotels
The main advantage of trading using opposite CARSALES and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALES 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.| CARSALES vs. CarsalesCom | CARSALES vs. High Liner Foods | CARSALES vs. EIDESVIK OFFSHORE NK | CARSALES vs. Eidesvik Offshore ASA |
| Meliá Hotels vs. Vulcan Materials | Meliá Hotels vs. Iridium Communications | Meliá Hotels vs. Easy Software AG | Meliá Hotels vs. Applied Materials |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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