Correlation Between Entravision Communications and MELIA HOTELS

Can any of the company-specific risk be diversified away by investing in both Entravision Communications and MELIA 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 Entravision Communications and MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Entravision Communications and MELIA HOTELS, you can compare the effects of market volatilities on Entravision Communications and MELIA 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 Entravision Communications with a short position of MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and MELIA HOTELS.

Diversification Opportunities for Entravision Communications and MELIA HOTELS

0.88

Correlation Coefficient

Entravision Communications  MELIA HOTELS

Very poor diversification

The 3 months correlation between Entravision and MELIA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS and Entravision Communications 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 Entravision Communications are associated (or correlated) with MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of Entravision Communications i.e., Entravision Communications and MELIA HOTELS go up and down completely randomly.

Pair Corralation between Entravision Communications and MELIA HOTELS

Assuming the 90 days horizon Entravision Communications is expected to generate 1.66 times more return on investment than MELIA HOTELS. However, Entravision Communications is 1.66 times more volatile than MELIA HOTELS. It trades about 0.12 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.17 per unit of risk. If you would invest  158.00  in Entravision Communications on April 24, 2025 and sell it today you would earn a total of  40.00  from holding Entravision Communications or generate 25.32% return on investment over 90 days.

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

Entravision Communications  vs.  MELIA HOTELS

Entravision Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

MELIA HOTELS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MELIA HOTELS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entravision Communications and MELIA HOTELS

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

The idea behind Entravision Communications and MELIA HOTELS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.