Correlation Between Meliá Hotels and Videolocity International

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

Diversification Opportunities for Meliá Hotels and Videolocity International

0.0

Correlation Coefficient

Meliá Hotels  Videolocity International

Pay attention - limited upside

The 3 months correlation between Meliá and Videolocity is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Videolocity International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Videolocity International 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 Videolocity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Videolocity International has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Videolocity International go up and down completely randomly.

Pair Corralation between Meliá Hotels and Videolocity International

If you would invest  0.01  in Videolocity International on December 4, 2024 and sell it today you would earn a total of  0.00  from holding Videolocity International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	79.66%
Values	Daily Returns

Meli Hotels International  vs.  Videolocity International

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 fragile 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.

Videolocity International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Videolocity International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Videolocity International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Meliá Hotels and Videolocity International

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

The idea behind Meli Hotels International and Videolocity International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.