Correlation Between MELIA HOTELS and Software Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Software Aktiengesellscha 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 Software Aktiengesellscha into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MELIA HOTELS and Software Aktiengesellschaft, you can compare the effects of market volatilities on MELIA HOTELS and Software Aktiengesellscha 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 Software Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Software Aktiengesellscha.

Diversification Opportunities for MELIA HOTELS and Software Aktiengesellscha

0.54

Correlation Coefficient

MELIA HOTELS  Software Aktiengesellscha

Very weak diversification

The 3 months correlation between MELIA and Software is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Software Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Aktiengesellscha 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 Software Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Aktiengesellscha has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Software Aktiengesellscha go up and down completely randomly.

Pair Corralation between MELIA HOTELS and Software Aktiengesellscha

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 42.95 times more return on investment than Software Aktiengesellscha. However, MELIA HOTELS is 42.95 times more volatile than Software Aktiengesellschaft. It trades about 0.11 of its potential returns per unit of risk. Software Aktiengesellschaft is currently generating about 0.22 per unit of risk. If you would invest  774.00  in MELIA HOTELS on March 12, 2024 and sell it today you would earn a total of  22.00  from holding MELIA HOTELS or generate 2.84% 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.  Software Aktiengesellschaft

MELIA HOTELS

Risk-Adjusted Performance

14 of 100

Good

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.

Software Aktiengesellscha

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Software Aktiengesellschaft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Software Aktiengesellscha is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MELIA HOTELS and Software Aktiengesellscha

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

The idea behind MELIA HOTELS and Software Aktiengesellschaft 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.