Correlation Between MELIA HOTELS and FOX P

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

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

Diversification Opportunities for MELIA HOTELS and FOX P

0.42

Correlation Coefficient

MELIA HOTELS  FOX P

Very weak diversification

The 3 months correlation between MELIA and FOX is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and FOX P B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOX P B 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 FOX P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOX P B has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and FOX P go up and down completely randomly.

Pair Corralation between MELIA HOTELS and FOX P

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 3.11 times less return on investment than FOX P. But when comparing it to its historical volatility, MELIA HOTELS is 1.09 times less risky than FOX P. It trades about 0.07 of its potential returns per unit of risk. FOX P B is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,500  in FOX P B on October 26, 2024 and sell it today you would earn a total of  860.00  from holding FOX P B or generate 24.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

MELIA HOTELS  vs.  FOX P B

MELIA HOTELS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 5 (%) 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.

FOX P B

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FOX P B are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FOX P reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MELIA HOTELS and FOX P

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

The idea behind MELIA HOTELS and FOX P B 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.