Correlation Between Fidelity Sustainable and Melia Hotels

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

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

Diversification Opportunities for Fidelity Sustainable and Melia Hotels

-0.4

Correlation Coefficient

Fidelity Sustainable  Melia Hotels

Very good diversification

The 3 months correlation between Fidelity and Melia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable USD and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Fidelity Sustainable 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 Fidelity Sustainable USD 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 Fidelity Sustainable i.e., Fidelity Sustainable and Melia Hotels go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Melia Hotels

Assuming the 90 days trading horizon Fidelity Sustainable is expected to generate 305.86 times less return on investment than Melia Hotels. But when comparing it to its historical volatility, Fidelity Sustainable USD is 3.16 times less risky than Melia Hotels. It trades about 0.0 of its potential returns per unit of risk. Melia Hotels is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  651.00  in Melia Hotels on September 13, 2024 and sell it today you would earn a total of  92.00  from holding Melia Hotels or generate 14.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Fidelity Sustainable USD  vs.  Melia Hotels

Fidelity Sustainable USD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Sustainable USD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fidelity Sustainable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 Fidelity Sustainable and Melia Hotels

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

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.