Correlation Between Meliá Hotels and SIRIUS XM

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

Diversification Opportunities for Meliá Hotels and SIRIUS XM

0.15

Correlation Coefficient

Meliá Hotels  SIRIUS XM

Average diversification

The 3 months correlation between Meliá and SIRIUS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and SIRIUS XM RADIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIRIUS XM RADIO 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 SIRIUS XM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIRIUS XM RADIO has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and SIRIUS XM go up and down completely randomly.

Pair Corralation between Meliá Hotels and SIRIUS XM

Assuming the 90 days horizon Meliá Hotels is expected to generate 18.98 times less return on investment than SIRIUS XM. But when comparing it to its historical volatility, Meli Hotels International is 1.35 times less risky than SIRIUS XM. It trades about 0.04 of its potential returns per unit of risk. SIRIUS XM RADIO is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest  2,043  in SIRIUS XM RADIO on November 28, 2024 and sell it today you would earn a total of  413.00  from holding SIRIUS XM RADIO or generate 20.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.64%
Values	Daily Returns

Meli Hotels International  vs.  SIRIUS XM RADIO

Meli Hotels International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Meliá Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SIRIUS XM RADIO

Risk-Adjusted Performance

Weak

Over the last 90 days SIRIUS XM RADIO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIRIUS XM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Meliá Hotels and SIRIUS XM

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

The idea behind Meli Hotels International and SIRIUS XM RADIO 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 Commodity Directory module to find actively traded commodities issued by global exchanges.