Can any of the company-specific risk be diversified away by investing in both Software Aktiengesellscha 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 Software Aktiengesellscha and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Aktiengesellschaft and MELIA HOTELS, you can compare the effects of market volatilities on Software Aktiengesellscha 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 Software Aktiengesellscha with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Aktiengesellscha and MELIA HOTELS.
Diversification Opportunities for Software Aktiengesellscha and MELIA HOTELS
The 3 months correlation between Software and MELIA is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Software Aktiengesellschaft and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and Software Aktiengesellscha 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 Software Aktiengesellschaft 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 Software Aktiengesellscha i.e., Software Aktiengesellscha and MELIA HOTELS go up and down completely randomly.
Pair Corralation between Software Aktiengesellscha and MELIA HOTELS
Assuming the 90 days horizon Software Aktiengesellscha is expected to generate 36.27 times less return on investment than MELIA HOTELS. But when comparing it to its historical volatility, Software Aktiengesellschaft is 40.27 times less risky than MELIA HOTELS. It trades about 0.22 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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 Software Aktiengesellschaft are ranked lower than 10 (%) 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.
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.