Correlation Between MELIA HOTELS and Atmos Energy

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

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

Diversification Opportunities for MELIA HOTELS and Atmos Energy

0.2

Correlation Coefficient

MELIA HOTELS  Atmos Energy

Modest diversification

The 3 months correlation between MELIA and Atmos is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Atmos Energy go up and down completely randomly.

Pair Corralation between MELIA HOTELS and Atmos Energy

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.85 times more return on investment than Atmos Energy. However, MELIA HOTELS is 1.85 times more volatile than Atmos Energy. It trades about 0.03 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.06 per unit of risk. If you would invest  567.00  in MELIA HOTELS on October 11, 2024 and sell it today you would earn a total of  157.00  from holding MELIA HOTELS or generate 27.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

MELIA HOTELS  vs.  Atmos Energy

MELIA HOTELS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 7 (%) 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.

Atmos Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Atmos Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MELIA HOTELS and Atmos Energy

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

The idea behind MELIA HOTELS and Atmos Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.