Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and MIRAMAR HOTEL 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 MIRAMAR HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and MIRAMAR HOTEL INV, you can compare the effects of market volatilities on MELIA HOTELS and MIRAMAR HOTEL 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 MIRAMAR HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and MIRAMAR HOTEL.
Diversification Opportunities for MELIA HOTELS and MIRAMAR HOTEL
The 3 months correlation between MELIA and MIRAMAR is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and MIRAMAR HOTEL INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIRAMAR HOTEL INV 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 MIRAMAR HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIRAMAR HOTEL INV has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and MIRAMAR HOTEL go up and down completely randomly.
Pair Corralation between MELIA HOTELS and MIRAMAR HOTEL
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.57 times more return on investment than MIRAMAR HOTEL. However, MELIA HOTELS is 1.57 times more volatile than MIRAMAR HOTEL INV. It trades about 0.2 of its potential returns per unit of risk. MIRAMAR HOTEL INV is currently generating about 0.0 per unit of risk. If you would invest 743.00 in MELIA HOTELS on March 6, 2024 and sell it today you would earn a total of 36.00 from holding MELIA HOTELS or generate 4.85% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 14 (%) 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.
Over the last 90 days MIRAMAR HOTEL INV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, MIRAMAR HOTEL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.