Correlation Between Groupama Entreprises and Meli Hotels

Can any of the company-specific risk be diversified away by investing in both Groupama Entreprises 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 Groupama Entreprises and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Groupama Entreprises N and Meli Hotels International, you can compare the effects of market volatilities on Groupama Entreprises 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 Groupama Entreprises with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupama Entreprises and Meli Hotels.

Diversification Opportunities for Groupama Entreprises and Meli Hotels

0.81

Correlation Coefficient

Groupama Entreprises  Meli Hotels

Very poor diversification

The 3 months correlation between Groupama and Meli is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Groupama Entreprises N 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 Groupama Entreprises 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 Groupama Entreprises N 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 Groupama Entreprises i.e., Groupama Entreprises and Meli Hotels go up and down completely randomly.

Pair Corralation between Groupama Entreprises and Meli Hotels

Assuming the 90 days trading horizon Groupama Entreprises is expected to generate 17.39 times less return on investment than Meli Hotels. But when comparing it to its historical volatility, Groupama Entreprises N is 127.95 times less risky than Meli Hotels. It trades about 0.94 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  649.00  in Meli Hotels International on October 5, 2024 and sell it today you would earn a total of  80.00  from holding Meli Hotels International or generate 12.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Groupama Entreprises N  vs.  Meli Hotels International

Groupama Entreprises

Risk-Adjusted Performance

0 of 100

Market Crasher

Over the last 90 days Groupama Entreprises N has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Groupama Entreprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Meli Hotels International

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Meli Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Groupama Entreprises and Meli Hotels

The main advantage of trading using opposite Groupama Entreprises and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupama Entreprises 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.

The idea behind Groupama Entreprises N 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.