Correlation Between Global Ship and Meli Hotels

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

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

Diversification Opportunities for Global Ship and Meli Hotels

0.03

Correlation Coefficient

Global Ship  Meli Hotels

Significant diversification

The 3 months correlation between Global and Meli is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Meli Hotels go up and down completely randomly.

Pair Corralation between Global Ship and Meli Hotels

Assuming the 90 days horizon Global Ship Lease is expected to under-perform the Meli Hotels. In addition to that, Global Ship is 1.21 times more volatile than Meli Hotels International. It trades about -0.01 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.09 per unit of volatility. If you would invest  636.00  in Meli Hotels International on September 5, 2024 and sell it today you would earn a total of  47.00  from holding Meli Hotels International or generate 7.39% return on investment over 90 days.

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

Global Ship Lease  vs.  Meli Hotels International

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Meli Hotels International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global Ship and Meli Hotels

The main advantage of trading using opposite Global Ship and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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 Global Ship Lease 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.