Correlation Between Keurig Dr and Meliá Hotels

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

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

Diversification Opportunities for Keurig Dr and Meliá Hotels

-0.03

Correlation Coefficient

Keurig Dr  Meliá Hotels

Good diversification

The 3 months correlation between Keurig and Meliá is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper 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 Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and Meliá Hotels go up and down completely randomly.

Pair Corralation between Keurig Dr and Meliá Hotels

Considering the 90-day investment horizon Keurig Dr is expected to generate 1.95 times less return on investment than Meliá Hotels. In addition to that, Keurig Dr is 1.39 times more volatile than Meli Hotels International. It trades about 0.1 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.26 per unit of volatility. If you would invest  678.00  in Meli Hotels International on December 4, 2024 and sell it today you would earn a total of  47.00  from holding Meli Hotels International or generate 6.93% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  Meli Hotels International

Keurig Dr Pepper

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keurig Dr Pepper are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Keurig Dr is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Meli Hotels International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meli Hotels International 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.

Pair Trading with Keurig Dr and Meliá Hotels

The main advantage of trading using opposite Keurig Dr and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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 Keurig Dr Pepper 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.