Correlation Between TOTAL GABON and MELIA HOTELS

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

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

Diversification Opportunities for TOTAL GABON and MELIA HOTELS

0.05

Correlation Coefficient

TOTAL GABON  MELIA HOTELS

Significant diversification

The 3 months correlation between TOTAL and MELIA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding TOTAL GABON and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and TOTAL GABON 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 TOTAL GABON 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 TOTAL GABON i.e., TOTAL GABON and MELIA HOTELS go up and down completely randomly.

Pair Corralation between TOTAL GABON and MELIA HOTELS

Assuming the 90 days trading horizon TOTAL GABON is expected to generate 1.61 times more return on investment than MELIA HOTELS. However, TOTAL GABON is 1.61 times more volatile than MELIA HOTELS. It trades about 0.09 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.06 per unit of risk. If you would invest  16,050  in TOTAL GABON on September 4, 2024 and sell it today you would earn a total of  2,300  from holding TOTAL GABON or generate 14.33% return on investment over 90 days.

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

TOTAL GABON  vs.  MELIA HOTELS

TOTAL GABON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL GABON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TOTAL GABON exhibited solid returns over the last few months and may actually be approaching a breakup point.

MELIA HOTELS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MELIA HOTELS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TOTAL GABON and MELIA HOTELS

The main advantage of trading using opposite TOTAL GABON and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOTAL GABON 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 TOTAL GABON 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.