Correlation Between Renaissance Europe and Meliá Hotels

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

By analyzing existing cross correlation between Renaissance Europe C and Meli Hotels International, you can compare the effects of market volatilities on Renaissance Europe and Meliá 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 Renaissance Europe with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renaissance Europe and Meliá Hotels.

Diversification Opportunities for Renaissance Europe and Meliá Hotels

-0.35

Correlation Coefficient

Renaissance Europe  Meliá Hotels

Very good diversification

The 3 months correlation between Renaissance and Meliá is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Renaissance Europe C and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International and Renaissance Europe 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 Renaissance Europe C are associated (or correlated) with Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Renaissance Europe i.e., Renaissance Europe and Meliá Hotels go up and down completely randomly.

Pair Corralation between Renaissance Europe and Meliá Hotels

Assuming the 90 days trading horizon Renaissance Europe is expected to generate 13.16 times less return on investment than Meliá Hotels. But when comparing it to its historical volatility, Renaissance Europe C is 2.11 times less risky than Meliá Hotels. It trades about 0.0 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  624.00  in Meli Hotels International on October 22, 2024 and sell it today you would earn a total of  55.00  from holding Meli Hotels International or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Renaissance Europe C  vs.  Meli Hotels International

Renaissance Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renaissance Europe C has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Renaissance Europe is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Meli Hotels International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Meliá Hotels is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Renaissance Europe and Meliá Hotels

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

The idea behind Renaissance Europe C and Meli Hotels International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.