Correlation Between JAPAN AIRLINES and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES 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 JAPAN AIRLINES and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and Meli Hotels International, you can compare the effects of market volatilities on JAPAN AIRLINES 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 JAPAN AIRLINES with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and Meli Hotels.
Diversification Opportunities for JAPAN AIRLINES and Meli Hotels
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JAPAN and Meli is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES i.e., JAPAN AIRLINES and Meli Hotels go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and Meli Hotels
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the Meli Hotels. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 1.33 times less risky than Meli Hotels. The stock trades about -0.06 of its potential returns per unit of risk. The Meli Hotels International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 626.00 in Meli Hotels International on August 28, 2024 and sell it today you would earn a total of 62.00 from holding Meli Hotels International or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
JAPAN AIRLINES vs. Meli Hotels International
Performance |
| Timeline |
| JAPAN AIRLINES |
| Meli Hotels International |
JAPAN AIRLINES and Meli Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and Meli Hotels
The main advantage of trading using opposite JAPAN AIRLINES and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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.| JAPAN AIRLINES vs. Hyrican Informationssysteme Aktiengesellschaft | JAPAN AIRLINES vs. Sunny Optical Technology | JAPAN AIRLINES vs. INFORMATION SVC GRP | JAPAN AIRLINES vs. NetSol Technologies |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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