Correlation Between MELIA HOTELS and GRUPO CARSO-A1

Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and GRUPO CARSO-A1 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 GRUPO CARSO-A1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MELIA HOTELS and GRUPO CARSO A1, you can compare the effects of market volatilities on MELIA HOTELS and GRUPO CARSO-A1 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 GRUPO CARSO-A1. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and GRUPO CARSO-A1.

Diversification Opportunities for MELIA HOTELS and GRUPO CARSO-A1

-0.31

Correlation Coefficient

MELIA HOTELS  GRUPO CARSO-A1

Very good diversification

The 3 months correlation between MELIA and GRUPO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and GRUPO CARSO A1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRUPO CARSO A1 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 GRUPO CARSO-A1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRUPO CARSO A1 has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and GRUPO CARSO-A1 go up and down completely randomly.

Pair Corralation between MELIA HOTELS and GRUPO CARSO-A1

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.3 times less return on investment than GRUPO CARSO-A1. But when comparing it to its historical volatility, MELIA HOTELS is 2.48 times less risky than GRUPO CARSO-A1. It trades about 0.13 of its potential returns per unit of risk. GRUPO CARSO A1 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  482.00  in GRUPO CARSO A1 on October 7, 2024 and sell it today you would earn a total of  43.00  from holding GRUPO CARSO A1 or generate 8.92% 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.  GRUPO CARSO A1

MELIA HOTELS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MELIA HOTELS unveiled solid returns over the last few months and may actually be approaching a breakup point.

GRUPO CARSO A1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GRUPO CARSO A1 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GRUPO CARSO-A1 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MELIA HOTELS and GRUPO CARSO-A1

The main advantage of trading using opposite MELIA HOTELS and GRUPO CARSO-A1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, GRUPO CARSO-A1 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 GRUPO CARSO-A1 will offset losses from the drop in GRUPO CARSO-A1's long position.

The idea behind MELIA HOTELS and GRUPO CARSO A1 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.