Correlation Between Ares Management and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both Ares Management and Meli 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 Ares Management and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management Corp and Meli Hotels International, you can compare the effects of market volatilities on Ares Management and Meli 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 Ares Management with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Meli Hotels.
Diversification Opportunities for Ares Management and Meli Hotels
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ares and Meli is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp 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 Ares Management 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 Ares Management Corp are associated (or correlated) with Meli 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 Ares Management i.e., Ares Management and Meli Hotels go up and down completely randomly.
Pair Corralation between Ares Management and Meli Hotels
Assuming the 90 days horizon Ares Management Corp is expected to generate 1.67 times more return on investment than Meli Hotels. However, Ares Management is 1.67 times more volatile than Meli Hotels International. It trades about 0.21 of its potential returns per unit of risk. Meli Hotels International is currently generating about -0.25 per unit of risk. If you would invest 17,424 in Ares Management Corp on October 25, 2024 and sell it today you would earn a total of 1,232 from holding Ares Management Corp or generate 7.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. Meli Hotels International
Performance |
| Timeline |
| Ares Management Corp |
| Meli Hotels International |
Ares Management and Meli Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Meli Hotels
The main advantage of trading using opposite Ares Management and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Meli 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 Meli Hotels will offset losses from the drop in Meli Hotels' long position.| Ares Management vs. Blackstone Group | Ares Management vs. The Bank of | Ares Management vs. Ameriprise Financial | Ares Management vs. State Street |
| Meli Hotels vs. Choice Hotels International | Meli Hotels vs. DAIDO METAL TD | Meli Hotels vs. InterContinental Hotels Group | Meli Hotels vs. Fortescue Metals Group |
Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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