Correlation Between SPECTRAL MEDICAL and MELIA HOTELS

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

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

Diversification Opportunities for SPECTRAL MEDICAL and MELIA HOTELS

-0.7

Correlation Coefficient

SPECTRAL MEDICAL  MELIA HOTELS

Excellent diversification

The 3 months correlation between SPECTRAL and MELIA is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPECTRAL MEDICAL and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 SPECTRAL MEDICAL i.e., SPECTRAL MEDICAL and MELIA HOTELS go up and down completely randomly.

Pair Corralation between SPECTRAL MEDICAL and MELIA HOTELS

Assuming the 90 days horizon SPECTRAL MEDICAL is expected to generate 2.36 times more return on investment than MELIA HOTELS. However, SPECTRAL MEDICAL is 2.36 times more volatile than MELIA HOTELS. It trades about 0.03 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.05 per unit of risk. If you would invest  31.00  in SPECTRAL MEDICAL on October 9, 2024 and sell it today you would earn a total of  4.00  from holding SPECTRAL MEDICAL or generate 12.9% return on investment over 90 days.

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

SPECTRAL MEDICAL  vs.  MELIA HOTELS

SPECTRAL MEDICAL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPECTRAL MEDICAL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SPECTRAL MEDICAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MELIA HOTELS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 8 (%) 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 SPECTRAL MEDICAL and MELIA HOTELS

The main advantage of trading using opposite SPECTRAL MEDICAL and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.