Correlation Between MELIA HOTELS and CHINA SOUTHN

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

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

Diversification Opportunities for MELIA HOTELS and CHINA SOUTHN

0.13

Correlation Coefficient

MELIA HOTELS  CHINA SOUTHN

Average diversification

The 3 months correlation between MELIA and CHINA is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR 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 CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of MELIA HOTELS i.e., MELIA HOTELS and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between MELIA HOTELS and CHINA SOUTHN

Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 0.62 times more return on investment than CHINA SOUTHN. However, MELIA HOTELS is 1.61 times less risky than CHINA SOUTHN. It trades about -0.07 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about -0.07 per unit of risk. If you would invest  733.00  in MELIA HOTELS on December 23, 2024 and sell it today you would lose (60.00) from holding MELIA HOTELS or give up 8.19% of portfolio value over 90 days.

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

MELIA HOTELS  vs.  CHINA SOUTHN AIR H

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 unsteady 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.

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MELIA HOTELS and CHINA SOUTHN

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

The idea behind MELIA HOTELS and CHINA SOUTHN AIR H 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.