Correlation Between Meliá Hotels and NioCorp Developments

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

Diversification Opportunities for Meliá Hotels and NioCorp Developments

-0.57

Correlation Coefficient

Meliá Hotels  NioCorp Developments

Excellent diversification

The 3 months correlation between Meliá and NioCorp is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments 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 NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and NioCorp Developments go up and down completely randomly.

Pair Corralation between Meliá Hotels and NioCorp Developments

Assuming the 90 days horizon Meli Hotels International is expected to under-perform the NioCorp Developments. But the pink sheet apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 2.76 times less risky than NioCorp Developments. The pink sheet trades about -0.06 of its potential returns per unit of risk. The NioCorp Developments Ltd is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  137.00  in NioCorp Developments Ltd on December 19, 2024 and sell it today you would earn a total of  44.00  from holding NioCorp Developments Ltd or generate 32.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Meli Hotels International  vs.  NioCorp Developments Ltd

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 unsteady 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.

NioCorp Developments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NioCorp Developments Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, NioCorp Developments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meliá Hotels and NioCorp Developments

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

The idea behind Meli Hotels International and NioCorp Developments Ltd 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.