Correlation Between Melia Hotels and Workspace Group

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

By analyzing existing cross correlation between Melia Hotels and Workspace Group PLC, you can compare the effects of market volatilities on Melia Hotels and Workspace Group 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 Melia Hotels with a short position of Workspace Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Workspace Group.

Diversification Opportunities for Melia Hotels and Workspace Group

-0.5

Correlation Coefficient

Melia Hotels  Workspace Group

Very good diversification

The 3 months correlation between Melia and Workspace is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Workspace Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workspace Group PLC and Melia 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 Melia Hotels are associated (or correlated) with Workspace Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workspace Group PLC has no effect on the direction of Melia Hotels i.e., Melia Hotels and Workspace Group go up and down completely randomly.

Pair Corralation between Melia Hotels and Workspace Group

Assuming the 90 days trading horizon Melia Hotels is expected to generate 0.95 times more return on investment than Workspace Group. However, Melia Hotels is 1.05 times less risky than Workspace Group. It trades about 0.25 of its potential returns per unit of risk. Workspace Group PLC is currently generating about -0.05 per unit of risk. If you would invest  604.00  in Melia Hotels on April 21, 2025 and sell it today you would earn a total of  151.00  from holding Melia Hotels or generate 25.0% return on investment over 90 days.

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

Melia Hotels  vs.  Workspace Group PLC

Melia Hotels

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Melia Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Workspace Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Workspace Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Workspace Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Melia Hotels and Workspace Group

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

The idea behind Melia Hotels and Workspace Group PLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.