Correlation Between American Public and Meliá Hotels

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

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

Diversification Opportunities for American Public and Meliá Hotels

0.64

Correlation Coefficient

American Public  Meliá Hotels

Poor diversification

The 3 months correlation between American and Meliá is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International and American Public 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 American Public Education are associated (or correlated) with Meliá Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of American Public i.e., American Public and Meliá Hotels go up and down completely randomly.

Pair Corralation between American Public and Meliá Hotels

Assuming the 90 days horizon American Public is expected to generate 1.38 times less return on investment than Meliá Hotels. In addition to that, American Public is 1.81 times more volatile than Meli Hotels International. It trades about 0.1 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.25 per unit of volatility. If you would invest  605.00  in Meli Hotels International on April 25, 2025 and sell it today you would earn a total of  159.00  from holding Meli Hotels International or generate 26.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

American Public Education  vs.  Meli Hotels International

American Public Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Meli Hotels International

Risk-Adjusted Performance

Solid

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

Pair Trading with American Public and Meliá Hotels

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

The idea behind American Public Education and Meli Hotels 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.