Correlation Between Meliá Hotels and Gushen

Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Gushen 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 Gushen 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 Gushen Inc, you can compare the effects of market volatilities on Meliá Hotels and Gushen 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 Gushen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Gushen.

Diversification Opportunities for Meliá Hotels and Gushen

-0.3

Correlation Coefficient

Meliá Hotels  Gushen

Very good diversification

The 3 months correlation between Meliá and Gushen is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Gushen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gushen Inc 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 Gushen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gushen Inc has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Gushen go up and down completely randomly.

Pair Corralation between Meliá Hotels and Gushen

Assuming the 90 days horizon Meli Hotels International is expected to generate 1.53 times more return on investment than Gushen. However, Meliá Hotels is 1.53 times more volatile than Gushen Inc. It trades about 0.06 of its potential returns per unit of risk. Gushen Inc is currently generating about -0.02 per unit of risk. If you would invest  473.00  in Meli Hotels International on October 2, 2024 and sell it today you would earn a total of  306.00  from holding Meli Hotels International or generate 64.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.57%
Values	Daily Returns

Meli Hotels International  vs.  Gushen Inc

Meli Hotels International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Meliá Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gushen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gushen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Gushen is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Meliá Hotels and Gushen

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

The idea behind Meli Hotels International and Gushen Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.