Correlation Between MELIA HOTELS and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Microchip Technology Incorporated, you can compare the effects of market volatilities on MELIA HOTELS and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Microchip Technology.
Diversification Opportunities for MELIA HOTELS and Microchip Technology
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MELIA and Microchip is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and Microchip Technology go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Microchip Technology
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 0.61 times more return on investment than Microchip Technology. However, MELIA HOTELS is 1.64 times less risky than Microchip Technology. It trades about -0.08 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.09 per unit of risk. If you would invest 726.00 in MELIA HOTELS on December 30, 2024 and sell it today you would lose (70.00) from holding MELIA HOTELS or give up 9.64% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MELIA HOTELS vs. Microchip Technology Incorpora
Performance |
Timeline |
MELIA HOTELS |
Microchip Technology |
MELIA HOTELS and Microchip Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MELIA HOTELS and Microchip Technology
The main advantage of trading using opposite MELIA HOTELS and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.MELIA HOTELS vs. IRONVELD PLC LS | MELIA HOTELS vs. Ross Stores | MELIA HOTELS vs. PT Steel Pipe | MELIA HOTELS vs. MAANSHAN IRON H |
Microchip Technology vs. MONEYSUPERMARKET | Microchip Technology vs. G5 Entertainment AB | Microchip Technology vs. EBRO FOODS | Microchip Technology vs. High Liner Foods |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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