Correlation Between Meituan and MTRLimited
Can any of the company-specific risk be diversified away by investing in both Meituan and MTRLimited 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 MTRLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan and MTR Limited, you can compare the effects of market volatilities on Meituan and MTRLimited 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 MTRLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan and MTRLimited.
Diversification Opportunities for Meituan and MTRLimited
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Meituan and MTRLimited is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Meituan and MTR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Limited 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 MTRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Limited has no effect on the direction of Meituan i.e., Meituan and MTRLimited go up and down completely randomly.
Pair Corralation between Meituan and MTRLimited
Assuming the 90 days horizon Meituan is expected to generate 1.34 times more return on investment than MTRLimited. However, Meituan is 1.34 times more volatile than MTR Limited. It trades about 0.04 of its potential returns per unit of risk. MTR Limited is currently generating about 0.04 per unit of risk. If you would invest 1,444 in Meituan on August 31, 2024 and sell it today you would earn a total of 630.00 from holding Meituan or generate 43.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.74% |
| Values | Daily Returns |
Meituan vs. MTR Limited
Performance |
| Timeline |
| Meituan |
| MTR Limited |
Meituan and MTRLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan and MTRLimited
The main advantage of trading using opposite Meituan and MTRLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan position performs unexpectedly, MTRLimited 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 MTRLimited will offset losses from the drop in MTRLimited's long position.| Meituan vs. Magnachip Semiconductor | Meituan vs. Zijin Mining Group | Meituan vs. MagnaChip Semiconductor Corp | Meituan vs. Harmony Gold Mining |
| MTRLimited vs. Union Pacific | MTRLimited vs. Superior Plus Corp | MTRLimited vs. NMI Holdings | MTRLimited vs. Origin Agritech |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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