Correlation Between Zambal Spain and Melia Hotels

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

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

Diversification Opportunities for Zambal Spain and Melia Hotels

-0.77

Correlation Coefficient

Zambal Spain  Melia Hotels

Pay attention - limited upside

The 3 months correlation between Zambal and Melia is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Zambal Spain Socimi and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Zambal Spain 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 Zambal Spain Socimi 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 Zambal Spain i.e., Zambal Spain and Melia Hotels go up and down completely randomly.

Pair Corralation between Zambal Spain and Melia Hotels

Assuming the 90 days trading horizon Zambal Spain Socimi is expected to under-perform the Melia Hotels. In addition to that, Zambal Spain is 1.12 times more volatile than Melia Hotels. It trades about -0.21 of its total potential returns per unit of risk. Melia Hotels is currently generating about 0.13 per unit of volatility. If you would invest  649.00  in Melia Hotels on September 12, 2024 and sell it today you would earn a total of  74.00  from holding Melia Hotels or generate 11.4% return on investment over 90 days.

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

Zambal Spain Socimi  vs.  Melia Hotels

Zambal Spain Socimi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zambal Spain Socimi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Melia Hotels

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Zambal Spain and Melia Hotels

The main advantage of trading using opposite Zambal Spain and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zambal Spain 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 Zambal Spain Socimi 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.