Correlation Between LANDSEA HOMES and MELIA HOTELS

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

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

Diversification Opportunities for LANDSEA HOMES and MELIA HOTELS

0.55

Correlation Coefficient

LANDSEA HOMES  MELIA HOTELS

Very weak diversification

The 3 months correlation between LANDSEA and MELIA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and LANDSEA HOMES 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 LANDSEA HOMES P 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 LANDSEA HOMES i.e., LANDSEA HOMES and MELIA HOTELS go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and MELIA HOTELS

Assuming the 90 days horizon LANDSEA HOMES P is expected to under-perform the MELIA HOTELS. In addition to that, LANDSEA HOMES is 2.34 times more volatile than MELIA HOTELS. It trades about -0.08 of its total potential returns per unit of risk. MELIA HOTELS is currently generating about -0.06 per unit of volatility. If you would invest  726.00  in MELIA HOTELS on December 29, 2024 and sell it today you would lose (56.00) from holding MELIA HOTELS or give up 7.71% of portfolio value over 90 days.

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

LANDSEA HOMES P  vs.  MELIA HOTELS

LANDSEA HOMES P

Risk-Adjusted Performance

Very Weak

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

MELIA HOTELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days MELIA HOTELS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with LANDSEA HOMES and MELIA HOTELS

The main advantage of trading using opposite LANDSEA HOMES and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LANDSEA HOMES 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 LANDSEA HOMES P 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.