Correlation Between Meliá Hotels and Genesco

Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Genesco 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 Genesco 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 Genesco, you can compare the effects of market volatilities on Meliá Hotels and Genesco 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 Genesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Genesco.

Diversification Opportunities for Meliá Hotels and Genesco

0.77

Correlation Coefficient

Meliá Hotels  Genesco

Poor diversification

The 3 months correlation between Meliá and Genesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Genesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesco 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 Genesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesco has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Genesco go up and down completely randomly.

Pair Corralation between Meliá Hotels and Genesco

Assuming the 90 days horizon Meli Hotels International is expected to generate 0.46 times more return on investment than Genesco. However, Meli Hotels International is 2.19 times less risky than Genesco. It trades about 0.04 of its potential returns per unit of risk. Genesco is currently generating about 0.02 per unit of risk. If you would invest  550.00  in Meli Hotels International on October 4, 2024 and sell it today you would earn a total of  179.00  from holding Meli Hotels International or generate 32.55% return on investment over 90 days.

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

Meli Hotels International  vs.  Genesco

Meli Hotels International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meliá Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Genesco

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Genesco are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Genesco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meliá Hotels and Genesco

The main advantage of trading using opposite Meliá Hotels and Genesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meliá Hotels position performs unexpectedly, Genesco 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 Genesco will offset losses from the drop in Genesco's long position.

The idea behind Meli Hotels International and Genesco 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.