Correlation Between Meli Hotels and News
Can any of the company-specific risk be diversified away by investing in both Meli Hotels and News 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 News 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 News Corporation, you can compare the effects of market volatilities on Meli Hotels and News 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 News. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and News.
Diversification Opportunities for Meli Hotels and News
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meli and News is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News 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 News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of Meli Hotels i.e., Meli Hotels and News go up and down completely randomly.
Pair Corralation between Meli Hotels and News
Assuming the 90 days horizon Meli Hotels is expected to generate 3.69 times less return on investment than News. But when comparing it to its historical volatility, Meli Hotels International is 1.09 times less risky than News. It trades about 0.11 of its potential returns per unit of risk. News Corporation is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 2,440 in News Corporation on August 29, 2024 and sell it today you would earn a total of 340.00 from holding News Corporation or generate 13.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meli Hotels International vs. News Corp.
Performance |
| Timeline |
| Meli Hotels International |
| News |
Meli Hotels and News Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meli Hotels and News
The main advantage of trading using opposite Meli Hotels and News positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meli Hotels position performs unexpectedly, News 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 News will offset losses from the drop in News' long position.The idea behind Meli Hotels International and News Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| News vs. Compagnie Plastic Omnium | News vs. Meli Hotels International | News vs. Eagle Materials | News vs. Xenia Hotels Resorts |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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