Correlation Between Renesas Electronics and MELIA HOTELS

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

By analyzing existing cross correlation between Renesas Electronics and MELIA HOTELS, you can compare the effects of market volatilities on Renesas Electronics and MELIA HOTELS 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 Renesas Electronics with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renesas Electronics and MELIA HOTELS.

Diversification Opportunities for Renesas Electronics and MELIA HOTELS

-0.37

Correlation Coefficient

Renesas Electronics  MELIA HOTELS

Very good diversification

The 3 months correlation between Renesas and MELIA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and Renesas Electronics 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 Renesas Electronics are associated (or correlated) with MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and MELIA HOTELS go up and down completely randomly.

Pair Corralation between Renesas Electronics and MELIA HOTELS

Assuming the 90 days horizon Renesas Electronics is expected to under-perform the MELIA HOTELS. In addition to that, Renesas Electronics is 1.67 times more volatile than MELIA HOTELS. It trades about -0.01 of its total potential returns per unit of risk. MELIA HOTELS is currently generating about 0.1 per unit of volatility. If you would invest  665.00  in MELIA HOTELS on October 10, 2024 and sell it today you would earn a total of  59.00  from holding MELIA HOTELS or generate 8.87% return on investment over 90 days.

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

Renesas Electronics  vs.  MELIA HOTELS

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Renesas Electronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MELIA HOTELS

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 7 (%) 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.

Pair Trading with Renesas Electronics and MELIA HOTELS

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

The idea behind Renesas Electronics and MELIA HOTELS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.