Correlation Between MELIA HOTELS and KELLOGG Dusseldorf
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and KELLOGG Dusseldorf 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 KELLOGG Dusseldorf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and KELLOGG Dusseldorf, you can compare the effects of market volatilities on MELIA HOTELS and KELLOGG Dusseldorf 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 KELLOGG Dusseldorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and KELLOGG Dusseldorf.
Diversification Opportunities for MELIA HOTELS and KELLOGG Dusseldorf
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MELIA and KELLOGG is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and KELLOGG Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KELLOGG Dusseldorf 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 KELLOGG Dusseldorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KELLOGG Dusseldorf has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and KELLOGG Dusseldorf go up and down completely randomly.
Pair Corralation between MELIA HOTELS and KELLOGG Dusseldorf
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 4.22 times more return on investment than KELLOGG Dusseldorf. However, MELIA HOTELS is 4.22 times more volatile than KELLOGG Dusseldorf. It trades about 0.15 of its potential returns per unit of risk. KELLOGG Dusseldorf is currently generating about 0.13 per unit of risk. If you would invest 705.00 in MELIA HOTELS on September 18, 2024 and sell it today you would earn a total of 46.00 from holding MELIA HOTELS or generate 6.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
MELIA HOTELS vs. KELLOGG Dusseldorf
Performance |
Timeline |
MELIA HOTELS |
KELLOGG Dusseldorf |
MELIA HOTELS and KELLOGG Dusseldorf Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MELIA HOTELS and KELLOGG Dusseldorf
The main advantage of trading using opposite MELIA HOTELS and KELLOGG Dusseldorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, KELLOGG Dusseldorf 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 KELLOGG Dusseldorf will offset losses from the drop in KELLOGG Dusseldorf's long position.MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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