Correlation Between Meliá Hotels and Atco Mining

Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Atco Mining 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 Meliá Hotels and Atco Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meli Hotels International and Atco Mining, you can compare the effects of market volatilities on Meliá Hotels and Atco Mining 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 Meliá Hotels with a short position of Atco Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Atco Mining.

Diversification Opportunities for Meliá Hotels and Atco Mining

-0.44

Correlation Coefficient

Meliá Hotels  Atco Mining

Very good diversification

The 3 months correlation between Meliá and Atco is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Atco Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atco Mining and Meliá 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 Meli Hotels International are associated (or correlated) with Atco Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atco Mining has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Atco Mining go up and down completely randomly.

Pair Corralation between Meliá Hotels and Atco Mining

Assuming the 90 days horizon Meli Hotels International is expected to under-perform the Atco Mining. But the pink sheet apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 11.43 times less risky than Atco Mining. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Atco Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1.15  in Atco Mining on December 28, 2024 and sell it today you would earn a total of  0.75  from holding Atco Mining or generate 65.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.67%
Values	Daily Returns

Meli Hotels International  vs.  Atco Mining

Meli Hotels International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Atco Mining

Risk-Adjusted Performance

OK

Over the last 90 days Atco Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady technical and fundamental indicators, Atco Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meliá Hotels and Atco Mining

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

The idea behind Meli Hotels International and Atco Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.