Correlation Between Meli Hotels and COFACE SA
Can any of the company-specific risk be diversified away by investing in both Meli Hotels and COFACE SA 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 Meli Hotels and COFACE SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meli Hotels International and COFACE SA, you can compare the effects of market volatilities on Meli Hotels and COFACE SA 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 Meli Hotels with a short position of COFACE SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and COFACE SA.
Diversification Opportunities for Meli Hotels and COFACE SA
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Meli and COFACE is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and COFACE SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFACE SA and Meli Hotels 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 Meli Hotels International are associated (or correlated) with COFACE SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFACE SA has no effect on the direction of Meli Hotels i.e., Meli Hotels and COFACE SA go up and down completely randomly.
Pair Corralation between Meli Hotels and COFACE SA
Assuming the 90 days horizon Meli Hotels is expected to generate 1.35 times less return on investment than COFACE SA. But when comparing it to its historical volatility, Meli Hotels International is 1.01 times less risky than COFACE SA. It trades about 0.04 of its potential returns per unit of risk. COFACE SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,116 in COFACE SA on October 29, 2024 and sell it today you would earn a total of 415.00 from holding COFACE SA or generate 37.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meli Hotels International vs. COFACE SA
Performance |
| Timeline |
| Meli Hotels International |
| COFACE SA |
Meli Hotels and COFACE SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meli Hotels and COFACE SA
The main advantage of trading using opposite Meli Hotels and COFACE SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meli Hotels position performs unexpectedly, COFACE SA 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 COFACE SA will offset losses from the drop in COFACE SA's long position.| Meli Hotels vs. Entravision Communications | Meli Hotels vs. AECOM TECHNOLOGY | Meli Hotels vs. Align Technology | Meli Hotels vs. Harmony Gold Mining |
| COFACE SA vs. NH Foods | COFACE SA vs. PURE FOODS TASMANIA | COFACE SA vs. MOLSON RS BEVERAGE | COFACE SA vs. PATTIES FOODS |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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