Correlation Between Melia Hotels and Bankinter

Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Bankinter 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 Melia Hotels and Bankinter into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Melia Hotels and Bankinter, you can compare the effects of market volatilities on Melia Hotels and Bankinter 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 Melia Hotels with a short position of Bankinter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Bankinter.

Diversification Opportunities for Melia Hotels and Bankinter

-0.07

Correlation Coefficient

Melia Hotels  Bankinter

Good diversification

The 3 months correlation between Melia and Bankinter is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Bankinter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankinter and Melia 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 Melia Hotels are associated (or correlated) with Bankinter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankinter has no effect on the direction of Melia Hotels i.e., Melia Hotels and Bankinter go up and down completely randomly.

Pair Corralation between Melia Hotels and Bankinter

Assuming the 90 days trading horizon Melia Hotels is expected to generate 1.39 times less return on investment than Bankinter. In addition to that, Melia Hotels is 1.03 times more volatile than Bankinter. It trades about 0.11 of its total potential returns per unit of risk. Bankinter is currently generating about 0.16 per unit of volatility. If you would invest  708.00  in Bankinter on September 14, 2024 and sell it today you would earn a total of  39.00  from holding Bankinter or generate 5.51% return on investment over 90 days.

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

Melia Hotels  vs.  Bankinter

Melia Hotels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Melia Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bankinter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bankinter has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bankinter is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Melia Hotels and Bankinter

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

The idea behind Melia Hotels and Bankinter 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.