Correlation Between GAMING FAC and MELIA HOTELS

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

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

Diversification Opportunities for GAMING FAC and MELIA HOTELS

-0.61

Correlation Coefficient

GAMING FAC  MELIA HOTELS

Excellent diversification

The 3 months correlation between GAMING and MELIA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and GAMING FAC 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 GAMING FAC SA 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 GAMING FAC i.e., GAMING FAC and MELIA HOTELS go up and down completely randomly.

Pair Corralation between GAMING FAC and MELIA HOTELS

Assuming the 90 days horizon GAMING FAC SA is expected to under-perform the MELIA HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, GAMING FAC SA is 1.02 times less risky than MELIA HOTELS. The stock trades about -0.23 of its potential returns per unit of risk. The MELIA HOTELS is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  692.00  in MELIA HOTELS on September 27, 2024 and sell it today you would earn a total of  41.00  from holding MELIA HOTELS or generate 5.92% return on investment over 90 days.

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

GAMING FAC SA  vs.  MELIA HOTELS

GAMING FAC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMING FAC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MELIA HOTELS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MELIA HOTELS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GAMING FAC and MELIA HOTELS

The main advantage of trading using opposite GAMING FAC and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMING FAC 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 GAMING FAC SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.