Correlation Between Meliá Hotels and Trupanion

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

Diversification Opportunities for Meliá Hotels and Trupanion

0.37

Correlation Coefficient

Meliá Hotels  Trupanion

Weak diversification

The 3 months correlation between Meliá and Trupanion is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Trupanion go up and down completely randomly.

Pair Corralation between Meliá Hotels and Trupanion

Assuming the 90 days horizon Meli Hotels International is expected to generate 0.56 times more return on investment than Trupanion. However, Meli Hotels International is 1.78 times less risky than Trupanion. It trades about 0.08 of its potential returns per unit of risk. Trupanion is currently generating about 0.02 per unit of risk. If you would invest  669.00  in Meli Hotels International on October 14, 2024 and sell it today you would earn a total of  51.00  from holding Meli Hotels International or generate 7.62% return on investment over 90 days.

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

Meli Hotels International  vs.  Trupanion

Meli Hotels International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meliá Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Trupanion

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Trupanion is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Meliá Hotels and Trupanion

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

The idea behind Meli Hotels International and Trupanion 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.