Correlation Between BW OFFSHORE and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both BW OFFSHORE 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 BW OFFSHORE and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW OFFSHORE LTD and Meli Hotels International, you can compare the effects of market volatilities on BW OFFSHORE 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 BW OFFSHORE with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW OFFSHORE and Meliá Hotels.
Diversification Opportunities for BW OFFSHORE and Meliá Hotels
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between XY81 and Meliá is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD 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 BW OFFSHORE 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 BW OFFSHORE LTD 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 BW OFFSHORE i.e., BW OFFSHORE and Meliá Hotels go up and down completely randomly.
Pair Corralation between BW OFFSHORE and Meliá Hotels
Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to under-perform the Meliá Hotels. In addition to that, BW OFFSHORE is 1.83 times more volatile than Meli Hotels International. It trades about -0.09 of its total potential returns per unit of risk. Meli Hotels International is currently generating about -0.08 per unit of volatility. If you would invest 729.00 in Meli Hotels International on November 5, 2024 and sell it today you would lose (16.00) from holding Meli Hotels International or give up 2.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW OFFSHORE LTD vs. Meli Hotels International
Performance |
| Timeline |
| BW OFFSHORE LTD |
| Meli Hotels International |
BW OFFSHORE and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW OFFSHORE and Meliá Hotels
The main advantage of trading using opposite BW OFFSHORE and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW OFFSHORE 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.| BW OFFSHORE vs. AIR LIQUIDE ADR | BW OFFSHORE vs. Delta Air Lines | BW OFFSHORE vs. NORWEGIAN AIR SHUT | BW OFFSHORE vs. CHINA SOUTHN AIR H |
| Meliá Hotels vs. ATRESMEDIA | Meliá Hotels vs. PENN NATL GAMING | Meliá Hotels vs. Townsquare Media | Meliá Hotels vs. Universal Entertainment |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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