Correlation Between Melia Hotels and Meridia Real

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

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

Diversification Opportunities for Melia Hotels and Meridia Real

0.51

Correlation Coefficient

Melia Hotels  Meridia Real

Very weak diversification

The 3 months correlation between Melia and Meridia is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Meridia Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridia Real Estate and Melia 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 Melia Hotels are associated (or correlated) with Meridia Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridia Real Estate has no effect on the direction of Melia Hotels i.e., Melia Hotels and Meridia Real go up and down completely randomly.

Pair Corralation between Melia Hotels and Meridia Real

Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.22 times more return on investment than Meridia Real. However, Melia Hotels is 1.22 times more volatile than Meridia Real Estate. It trades about 0.18 of its potential returns per unit of risk. Meridia Real Estate is currently generating about 0.14 per unit of risk. If you would invest  649.00  in Melia Hotels on September 16, 2024 and sell it today you would earn a total of  105.00  from holding Melia Hotels or generate 16.18% return on investment over 90 days.

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

Melia Hotels  vs.  Meridia Real Estate

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 rather unsteady essential indicators, Melia Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Meridia Real Estate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meridia Real Estate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Meridia Real may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Melia Hotels and Meridia Real

The main advantage of trading using opposite Melia Hotels and Meridia Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Meridia Real 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 Meridia Real will offset losses from the drop in Meridia Real's long position.

The idea behind Melia Hotels and Meridia Real Estate 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.