Correlation Between Meliá Hotels and Gruppo Mutuionline

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

Diversification Opportunities for Meliá Hotels and Gruppo Mutuionline

0.67

Correlation Coefficient

Meliá Hotels  Gruppo Mutuionline

Poor diversification

The 3 months correlation between Meliá and Gruppo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Gruppo Mutuionline SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gruppo Mutuionline SpA 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 Gruppo Mutuionline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gruppo Mutuionline SpA has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Gruppo Mutuionline go up and down completely randomly.

Pair Corralation between Meliá Hotels and Gruppo Mutuionline

Assuming the 90 days horizon Meli Hotels International is expected to generate 0.9 times more return on investment than Gruppo Mutuionline. However, Meli Hotels International is 1.11 times less risky than Gruppo Mutuionline. It trades about 0.04 of its potential returns per unit of risk. Gruppo Mutuionline SpA is currently generating about 0.03 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.  Gruppo Mutuionline SpA

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.

Gruppo Mutuionline SpA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gruppo Mutuionline SpA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Gruppo Mutuionline may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Meliá Hotels and Gruppo Mutuionline

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

The idea behind Meli Hotels International and Gruppo Mutuionline SpA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.