Correlation Between Catenon SA and Melia Hotels

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

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

Diversification Opportunities for Catenon SA and Melia Hotels

-0.14

Correlation Coefficient

Catenon SA  Melia Hotels

Good diversification

The 3 months correlation between Catenon and Melia is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Catenon SA and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Catenon SA 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 Catenon 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 Catenon SA i.e., Catenon SA and Melia Hotels go up and down completely randomly.

Pair Corralation between Catenon SA and Melia Hotels

Assuming the 90 days trading horizon Catenon SA is expected to under-perform the Melia Hotels. In addition to that, Catenon SA is 2.57 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 0.0 per unit of volatility. If you would invest  718.00  in Melia Hotels on October 25, 2024 and sell it today you would lose (9.00) from holding Melia Hotels or give up 1.25% of portfolio value over 90 days.

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

Catenon SA  vs.  Melia Hotels

Catenon SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catenon SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Catenon SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Melia Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Melia Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Catenon SA and Melia Hotels

The main advantage of trading using opposite Catenon SA and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catenon SA 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' long position.

The idea behind Catenon 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..