Correlation Between The9 and Meliá Hotels
Can any of the company-specific risk be diversified away by investing in both The9 and Meliá 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 The9 and Meliá Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The9 Ltd ADR and Meli Hotels International, you can compare the effects of market volatilities on The9 and Meliá 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 The9 with a short position of Meliá Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Meliá Hotels.
Diversification Opportunities for The9 and Meliá Hotels
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between The9 and Meliá is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR 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 The9 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 The9 Ltd ADR are associated (or correlated) with Meliá 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 The9 i.e., The9 and Meliá Hotels go up and down completely randomly.
Pair Corralation between The9 and Meliá Hotels
Given the investment horizon of 90 days The9 Ltd ADR is expected to generate 2.99 times more return on investment than Meliá Hotels. However, The9 is 2.99 times more volatile than Meli Hotels International. It trades about 0.05 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.04 per unit of risk. If you would invest 766.00 in The9 Ltd ADR on September 3, 2024 and sell it today you would earn a total of 709.00 from holding The9 Ltd ADR or generate 92.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.98% |
| Values | Daily Returns |
The9 Ltd ADR vs. Meli Hotels International
Performance |
| Timeline |
| The9 Ltd ADR |
| Meli Hotels International |
The9 and Meliá Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The9 and Meliá Hotels
The main advantage of trading using opposite The9 and Meliá Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 position performs unexpectedly, Meliá 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 Meliá Hotels will offset losses from the drop in Meliá Hotels' long position.The idea behind The9 Ltd ADR and Meli Hotels International 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.| Meliá Hotels vs. Nike Inc | Meliá Hotels vs. Duluth Holdings | Meliá Hotels vs. Kontoor Brands | Meliá Hotels vs. Summit Materials |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |