Correlation Between SOGECLAIR and MELIA HOTELS

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

By analyzing existing cross correlation between SOGECLAIR SA INH and MELIA HOTELS, you can compare the effects of market volatilities on SOGECLAIR 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 SOGECLAIR with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOGECLAIR and MELIA HOTELS.

Diversification Opportunities for SOGECLAIR and MELIA HOTELS

-0.17

Correlation Coefficient

SOGECLAIR  MELIA HOTELS

Good diversification

The 3 months correlation between SOGECLAIR and MELIA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding SOGECLAIR SA INH and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and SOGECLAIR 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 SOGECLAIR SA INH 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 SOGECLAIR i.e., SOGECLAIR and MELIA HOTELS go up and down completely randomly.

Pair Corralation between SOGECLAIR and MELIA HOTELS

Assuming the 90 days horizon SOGECLAIR SA INH is expected to under-perform the MELIA HOTELS. In addition to that, SOGECLAIR is 1.22 times more volatile than MELIA HOTELS. It trades about -0.01 of its total potential returns per unit of risk. MELIA HOTELS is currently generating about 0.17 per unit of volatility. If you would invest  631.00  in MELIA HOTELS on September 17, 2024 and sell it today you would earn a total of  119.00  from holding MELIA HOTELS or generate 18.86% return on investment over 90 days.

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

SOGECLAIR SA INH  vs.  MELIA HOTELS

SOGECLAIR SA INH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOGECLAIR SA INH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SOGECLAIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MELIA HOTELS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MELIA HOTELS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOGECLAIR and MELIA HOTELS

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

The idea behind SOGECLAIR SA INH and MELIA HOTELS 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.