Correlation Between MELIA HOTELS and Casio Computer

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

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

Diversification Opportunities for MELIA HOTELS and Casio Computer

0.64

Correlation Coefficient

MELIA HOTELS  Casio Computer

Poor diversification

The 3 months correlation between MELIA and Casio is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd 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 Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Casio Computer go up and down completely randomly.

Pair Corralation between MELIA HOTELS and Casio Computer

Assuming the 90 days trading horizon MELIA HOTELS is expected to under-perform the Casio Computer. In addition to that, MELIA HOTELS is 1.54 times more volatile than Casio Computer CoLtd. It trades about -0.08 of its total potential returns per unit of risk. Casio Computer CoLtd is currently generating about -0.06 per unit of volatility. If you would invest  787.00  in Casio Computer CoLtd on December 22, 2024 and sell it today you would lose (36.00) from holding Casio Computer CoLtd or give up 4.57% of portfolio value over 90 days.

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

MELIA HOTELS  vs.  Casio Computer CoLtd

MELIA HOTELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days MELIA HOTELS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Casio Computer CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Casio Computer CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Casio Computer 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 Casio Computer

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

The idea behind MELIA HOTELS and Casio Computer CoLtd 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.

Check out your portfolio center.

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..