Correlation Between HomeToGo and MELIA HOTELS

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

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

Diversification Opportunities for HomeToGo and MELIA HOTELS

-0.44

Correlation Coefficient

HomeToGo  MELIA HOTELS

Very good diversification

The 3 months correlation between HomeToGo and MELIA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and HomeToGo 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 HomeToGo SE 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 HomeToGo i.e., HomeToGo and MELIA HOTELS go up and down completely randomly.

Pair Corralation between HomeToGo and MELIA HOTELS

Assuming the 90 days trading horizon HomeToGo SE is expected to under-perform the MELIA HOTELS. In addition to that, HomeToGo is 1.47 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 0.02 per unit of volatility. If you would invest  584.00  in MELIA HOTELS on October 23, 2024 and sell it today you would earn a total of  90.00  from holding MELIA HOTELS or generate 15.41% return on investment over 90 days.

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

HomeToGo SE  vs.  MELIA HOTELS

HomeToGo SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

MELIA HOTELS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MELIA HOTELS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HomeToGo and MELIA HOTELS

The main advantage of trading using opposite HomeToGo and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeToGo 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 HomeToGo SE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.