Correlation Between Melia Hotels and Ams AG

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

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

Diversification Opportunities for Melia Hotels and Ams AG

-0.44

Correlation Coefficient

Melia Hotels  Ams AG

Very good diversification

The 3 months correlation between Melia and Ams is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ams AG 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 Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ams AG has no effect on the direction of Melia Hotels i.e., Melia Hotels and Ams AG go up and down completely randomly.

Pair Corralation between Melia Hotels and Ams AG

Assuming the 90 days trading horizon Melia Hotels is expected to generate 50.64 times less return on investment than Ams AG. But when comparing it to its historical volatility, Melia Hotels is 32.78 times less risky than Ams AG. It trades about 0.03 of its potential returns per unit of risk. Ams AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,458  in Ams AG on October 24, 2024 and sell it today you would lose (2,806) from holding Ams AG or give up 81.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.72%
Values	Daily Returns

Melia Hotels  vs.  Ams AG

Melia Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ams AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ams AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Melia Hotels and Ams AG

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

The idea behind Melia Hotels and Ams AG 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.