Correlation Between Humana and Melia Hotels

Can any of the company-specific risk be diversified away by investing in both Humana 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 Humana and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Humana Inc and Melia Hotels, you can compare the effects of market volatilities on Humana 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 Humana with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and Melia Hotels.

Diversification Opportunities for Humana and Melia Hotels

-0.08

Correlation Coefficient

Humana  Melia Hotels

Good diversification

The 3 months correlation between Humana and Melia is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Humana 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 Humana Inc 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 Humana i.e., Humana and Melia Hotels go up and down completely randomly.

Pair Corralation between Humana and Melia Hotels

Assuming the 90 days trading horizon Humana Inc is expected to under-perform the Melia Hotels. In addition to that, Humana is 1.62 times more volatile than Melia Hotels. It trades about -0.06 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  604.00  in Melia Hotels on September 13, 2024 and sell it today you would earn a total of  139.00  from holding Melia Hotels or generate 23.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Humana Inc  vs.  Melia Hotels

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Melia Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Melia Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Humana and Melia Hotels

The main advantage of trading using opposite Humana and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humana 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.

The idea behind Humana Inc and Melia Hotels 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.