Correlation Between APPLIED MATERIALS and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Meli Hotels International, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Meli Hotels.
Diversification Opportunities for APPLIED MATERIALS and Meli Hotels
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between APPLIED and Meli is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Meli Hotels go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Meli Hotels
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Meli Hotels. But the stock apears to be less risky and, when comparing its historical volatility, APPLIED MATERIALS is 1.03 times less risky than Meli Hotels. The stock trades about -0.17 of its potential returns per unit of risk. The Meli Hotels International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 689.00 in Meli Hotels International on September 24, 2024 and sell it today you would earn a total of 37.00 from holding Meli Hotels International or generate 5.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Meli Hotels International
Performance |
| Timeline |
| APPLIED MATERIALS |
| Meli Hotels International |
APPLIED MATERIALS and Meli Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Meli Hotels
The main advantage of trading using opposite APPLIED MATERIALS and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Microsoft |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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