Correlation Between Meli Hotels and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Meli Hotels and Sumitomo Chemical 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 Sumitomo Chemical 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 Sumitomo Chemical, you can compare the effects of market volatilities on Meli Hotels and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and Sumitomo Chemical.
Diversification Opportunities for Meli Hotels and Sumitomo Chemical
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Meli and Sumitomo is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Meli Hotels i.e., Meli Hotels and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Meli Hotels and Sumitomo Chemical
Assuming the 90 days horizon Meli Hotels International is expected to generate 1.2 times more return on investment than Sumitomo Chemical. However, Meli Hotels is 1.2 times more volatile than Sumitomo Chemical. It trades about 0.01 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.24 per unit of risk. If you would invest 670.00 in Meli Hotels International on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Meli Hotels International or generate 0.0% 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. Sumitomo Chemical
Performance |
| Timeline |
| Meli Hotels International |
| Sumitomo Chemical |
Meli Hotels and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meli Hotels and Sumitomo Chemical
The main advantage of trading using opposite Meli Hotels and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meli Hotels position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Meli Hotels vs. Avanos Medical | Meli Hotels vs. TYSON FOODS A | Meli Hotels vs. INDOFOOD AGRI RES | Meli Hotels vs. SAFETY MEDICAL PROD |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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