Correlation Between Meliá Hotels and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Franco Nevada 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 Meliá Hotels and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meli Hotels International and Franco Nevada, you can compare the effects of market volatilities on Meliá Hotels and Franco Nevada 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 Meliá Hotels with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Franco Nevada.
Diversification Opportunities for Meliá Hotels and Franco Nevada
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Meliá and Franco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Meliá Hotels 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 Meli Hotels International are associated (or correlated) with Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Franco Nevada go up and down completely randomly.
Pair Corralation between Meliá Hotels and Franco Nevada
Assuming the 90 days horizon Meliá Hotels is expected to generate 2.22 times less return on investment than Franco Nevada. But when comparing it to its historical volatility, Meli Hotels International is 1.02 times less risky than Franco Nevada. It trades about 0.04 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 10,265 in Franco Nevada on December 5, 2024 and sell it today you would earn a total of 3,540 from holding Franco Nevada or generate 34.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Meli Hotels International vs. Franco Nevada
Performance |
Timeline |
Meli Hotels International |
Franco Nevada |
Meliá Hotels and Franco Nevada Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Meliá Hotels and Franco Nevada
The main advantage of trading using opposite Meliá Hotels and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, Franco Nevada 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 Franco Nevada will offset losses from the drop in Franco Nevada's long position.Meliá Hotels vs. TOREX SEMICONDUCTOR LTD | Meliá Hotels vs. Nordic Semiconductor ASA | Meliá Hotels vs. MagnaChip Semiconductor Corp | Meliá Hotels vs. KIMBALL ELECTRONICS |
Franco Nevada vs. USWE SPORTS AB | Franco Nevada vs. BAKED GAMES SA | Franco Nevada vs. Columbia Sportswear | Franco Nevada vs. GUILD ESPORTS PLC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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