Correlation Between APPLIED MATERIALS and Meliá Hotels

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

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

Diversification Opportunities for APPLIED MATERIALS and Meliá Hotels

-0.63

Correlation Coefficient

APPLIED MATERIALS  Meliá Hotels

Excellent diversification

The 3 months correlation between APPLIED and Meliá is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Meliá Hotels go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Meliá Hotels

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 0.9 times more return on investment than Meliá Hotels. However, APPLIED MATERIALS is 1.11 times less risky than Meliá Hotels. It trades about 0.21 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.04 per unit of risk. If you would invest  16,276  in APPLIED MATERIALS on October 12, 2024 and sell it today you would earn a total of  920.00  from holding APPLIED MATERIALS or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

APPLIED MATERIALS  vs.  Meli Hotels International

APPLIED MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLIED MATERIALS 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.

Meli Hotels International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 6 (%) 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 APPLIED MATERIALS and Meliá Hotels

The main advantage of trading using opposite APPLIED MATERIALS and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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 APPLIED MATERIALS 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..