Correlation Between Concurrent Technologies and Melia Hotels

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

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

Diversification Opportunities for Concurrent Technologies and Melia Hotels

0.61

Correlation Coefficient

Concurrent Technologies  Melia Hotels

Poor diversification

The 3 months correlation between Concurrent and Melia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Concurrent Technologies Plc and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Concurrent Technologies 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 Concurrent Technologies Plc 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 Concurrent Technologies i.e., Concurrent Technologies and Melia Hotels go up and down completely randomly.

Pair Corralation between Concurrent Technologies and Melia Hotels

Assuming the 90 days trading horizon Concurrent Technologies Plc is expected to generate 2.24 times more return on investment than Melia Hotels. However, Concurrent Technologies is 2.24 times more volatile than Melia Hotels. It trades about 0.08 of its potential returns per unit of risk. Melia Hotels is currently generating about 0.15 per unit of risk. If you would invest  11,700  in Concurrent Technologies Plc on September 23, 2024 and sell it today you would earn a total of  1,550  from holding Concurrent Technologies Plc or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Concurrent Technologies Plc  vs.  Melia Hotels

Concurrent Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Concurrent Technologies Plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Concurrent Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Melia Hotels

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Melia Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Concurrent Technologies and Melia Hotels

The main advantage of trading using opposite Concurrent Technologies and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Concurrent Technologies 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 Concurrent Technologies Plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.