Correlation Between Host Hotels and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Host Hotels 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 Host Hotels and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Host Hotels Resorts and Melia Hotels, you can compare the effects of market volatilities on Host Hotels 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 Host Hotels with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Melia Hotels.
Diversification Opportunities for Host Hotels and Melia Hotels
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Host and Melia is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Host Hotels 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 Host Hotels Resorts 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 Host Hotels i.e., Host Hotels and Melia Hotels go up and down completely randomly.
Pair Corralation between Host Hotels and Melia Hotels
Assuming the 90 days trading horizon Host Hotels is expected to generate 1.91 times less return on investment than Melia Hotels. In addition to that, Host Hotels is 1.14 times more volatile than Melia Hotels. It trades about 0.03 of its total potential returns per unit of risk. Melia Hotels is currently generating about 0.06 per unit of volatility. If you would invest 473.00 in Melia Hotels on September 24, 2024 and sell it today you would earn a total of 272.00 from holding Melia Hotels or generate 57.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 97.21% |
Values | Daily Returns |
Host Hotels Resorts vs. Melia Hotels
Performance |
Timeline |
Host Hotels Resorts |
Melia Hotels |
Host Hotels and Melia Hotels Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Host Hotels and Melia Hotels
The main advantage of trading using opposite Host Hotels and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels 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' long position.Host Hotels vs. Uniper SE | Host Hotels vs. Mulberry Group PLC | Host Hotels vs. London Security Plc | Host Hotels vs. Triad Group PLC |
Melia Hotels vs. Uniper SE | Melia Hotels vs. Mulberry Group PLC | Melia Hotels vs. London Security Plc | Melia Hotels vs. Triad Group PLC |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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