Correlation Between Hilton Worldwide and Meliá Hotels

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

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

Diversification Opportunities for Hilton Worldwide and Meliá Hotels

0.14

Correlation Coefficient

Hilton Worldwide  Meliá Hotels

Average diversification

The 3 months correlation between Hilton and Meliá is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings 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 Hilton Worldwide 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 Hilton Worldwide Holdings 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 Hilton Worldwide i.e., Hilton Worldwide and Meliá Hotels go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Meliá Hotels

Assuming the 90 days trading horizon Hilton Worldwide is expected to generate 1.58 times less return on investment than Meliá Hotels. But when comparing it to its historical volatility, Hilton Worldwide Holdings is 1.24 times less risky than Meliá Hotels. It trades about 0.06 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  671.00  in Meli Hotels International on November 29, 2024 and sell it today you would earn a total of  43.00  from holding Meli Hotels International or generate 6.41% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Meli Hotels International

Hilton Worldwide Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hilton Worldwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Meli Hotels International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 5 (%) 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 March 2025.

Pair Trading with Hilton Worldwide and Meliá Hotels

The main advantage of trading using opposite Hilton Worldwide and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Worldwide 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 Hilton Worldwide Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.