Correlation Between MELIA HOTELS and Traton SE

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

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

Diversification Opportunities for MELIA HOTELS and Traton SE

0.0

Correlation Coefficient

MELIA HOTELS  Traton SE

Pay attention - limited upside

The 3 months correlation between MELIA and Traton is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE 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 Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Traton SE go up and down completely randomly.

Pair Corralation between MELIA HOTELS and Traton SE

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 0.6 times more return on investment than Traton SE. However, MELIA HOTELS is 1.67 times less risky than Traton SE. It trades about 0.09 of its potential returns per unit of risk. Traton SE is currently generating about -0.08 per unit of risk. If you would invest  703.00  in MELIA HOTELS on October 11, 2024 and sell it today you would earn a total of  15.00  from holding MELIA HOTELS or generate 2.13% return on investment over 90 days.

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

MELIA HOTELS  vs.  Traton SE

MELIA HOTELS

Risk-Adjusted Performance

6 of 100

Modest

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

Traton SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Traton SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Traton SE 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 Traton SE

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

The idea behind MELIA HOTELS and Traton SE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.