Correlation Between Davide Campari and Meliá Hotels

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

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

Diversification Opportunities for Davide Campari and Meliá Hotels

-0.62

Correlation Coefficient

Davide Campari  Meliá Hotels

Excellent diversification

The 3 months correlation between Davide and Meliá is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Davide Campari Milano 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 Davide Campari 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 Davide Campari Milano 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 Davide Campari i.e., Davide Campari and Meliá Hotels go up and down completely randomly.

Pair Corralation between Davide Campari and Meliá Hotels

Assuming the 90 days horizon Davide Campari Milano is expected to under-perform the Meliá Hotels. In addition to that, Davide Campari is 1.75 times more volatile than Meli Hotels International. It trades about -0.04 of its total potential returns per unit of risk. Meli Hotels International is currently generating about -0.02 per unit of volatility. If you would invest  729.00  in Meli Hotels International on October 11, 2024 and sell it today you would lose (12.00) from holding Meli Hotels International or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.44%
Values	Daily Returns

Davide Campari Milano  vs.  Meli Hotels International

Davide Campari Milano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davide Campari Milano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Meli Hotels International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meliá Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Davide Campari and Meliá Hotels

The main advantage of trading using opposite Davide Campari and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davide Campari 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 Davide Campari Milano 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.