Correlation Between Meliá Hotels and Yihai International

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

Diversification Opportunities for Meliá Hotels and Yihai International

0.62

Correlation Coefficient

Meliá Hotels  Yihai International

Poor diversification

The 3 months correlation between Meliá and Yihai is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Yihai International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yihai International 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 Yihai International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yihai International has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Yihai International go up and down completely randomly.

Pair Corralation between Meliá Hotels and Yihai International

Assuming the 90 days horizon Meliá Hotels is expected to generate 5.45 times less return on investment than Yihai International. But when comparing it to its historical volatility, Meli Hotels International is 2.46 times less risky than Yihai International. It trades about 0.04 of its potential returns per unit of risk. Yihai International Holding is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  161.00  in Yihai International Holding on December 4, 2024 and sell it today you would earn a total of  10.00  from holding Yihai International Holding or generate 6.21% 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.  Yihai International Holding

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 3 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Yihai International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yihai International Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yihai International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Meliá Hotels and Yihai International

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

The idea behind Meli Hotels International and Yihai International Holding 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..