Correlation Between DFDS AS and Meli Hotels

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

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

Diversification Opportunities for DFDS AS and Meli Hotels

-0.65

Correlation Coefficient

DFDS AS  Meli Hotels

Excellent diversification

The 3 months correlation between DFDS and Meli is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding DFDS AS 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 DFDS AS 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 DFDS AS 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 DFDS AS i.e., DFDS AS and Meli Hotels go up and down completely randomly.

Pair Corralation between DFDS AS and Meli Hotels

Assuming the 90 days horizon DFDS AS is expected to under-perform the Meli Hotels. In addition to that, DFDS AS is 1.2 times more volatile than Meli Hotels International. It trades about -0.09 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.21 per unit of volatility. If you would invest  679.00  in Meli Hotels International on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Meli Hotels International or generate 7.36% return on investment over 90 days.

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

DFDS AS  vs.  Meli Hotels International

DFDS AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DFDS AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 DFDS AS and Meli Hotels

The main advantage of trading using opposite DFDS AS and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFDS AS 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 DFDS AS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.