Correlation Between Meituan and Amazon
Can any of the company-specific risk be diversified away by investing in both Meituan and Amazon 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 Meituan and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan and Amazon Inc, you can compare the effects of market volatilities on Meituan and Amazon 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 Meituan with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan and Amazon.
Diversification Opportunities for Meituan and Amazon
Poor diversification
The 3 months correlation between Meituan and Amazon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Meituan and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Meituan 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 Meituan are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Meituan i.e., Meituan and Amazon go up and down completely randomly.
Pair Corralation between Meituan and Amazon
Assuming the 90 days horizon Meituan is expected to generate 1.97 times more return on investment than Amazon. However, Meituan is 1.97 times more volatile than Amazon Inc. It trades about 0.09 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.06 per unit of risk. If you would invest 1,435 in Meituan on August 25, 2024 and sell it today you would earn a total of 630.00 from holding Meituan or generate 43.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meituan vs. Amazon Inc
Performance |
| Timeline |
| Meituan |
| Amazon Inc |
Meituan and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan and Amazon
The main advantage of trading using opposite Meituan and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Meituan vs. CN MODERN DAIRY | Meituan vs. New Residential Investment | Meituan vs. AUSTEVOLL SEAFOOD | Meituan vs. Monster Beverage Corp |
| Amazon vs. Neinor Homes SA | Amazon vs. STMicroelectronics NV | Amazon vs. CENTURIA OFFICE REIT | Amazon vs. Autohome ADR |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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