Correlation Between Melia Hotels and Magnora ASA

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

By analyzing existing cross correlation between Melia Hotels and Magnora ASA, you can compare the effects of market volatilities on Melia Hotels and Magnora ASA 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 Magnora ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Magnora ASA.

Diversification Opportunities for Melia Hotels and Magnora ASA

0.69

Correlation Coefficient

Melia Hotels  Magnora ASA

Poor diversification

The 3 months correlation between Melia and Magnora is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Magnora ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnora ASA 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 Magnora ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnora ASA has no effect on the direction of Melia Hotels i.e., Melia Hotels and Magnora ASA go up and down completely randomly.

Pair Corralation between Melia Hotels and Magnora ASA

Assuming the 90 days trading horizon Melia Hotels is expected to generate 11.77 times less return on investment than Magnora ASA. But when comparing it to its historical volatility, Melia Hotels is 1.62 times less risky than Magnora ASA. It trades about 0.02 of its potential returns per unit of risk. Magnora ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,250  in Magnora ASA on October 20, 2024 and sell it today you would earn a total of  360.00  from holding Magnora ASA or generate 16.0% return on investment over 90 days.

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

Melia Hotels  vs.  Magnora ASA

Melia Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Melia Hotels is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Magnora ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnora ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Magnora ASA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melia Hotels and Magnora ASA

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

The idea behind Melia Hotels and Magnora ASA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.