Correlation Between POSBO UNSPADRS/20YC1 and Meli Hotels

Can any of the company-specific risk be diversified away by investing in both POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between POSBO UNSPADRS20YC1 and Meli Hotels International, you can compare the effects of market volatilities on POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSBO UNSPADRS/20YC1 and Meli Hotels.

Diversification Opportunities for POSBO UNSPADRS/20YC1 and Meli Hotels

-0.47

Correlation Coefficient

POSBO UNSPADRS/20YC1  Meli Hotels

Very good diversification

The 3 months correlation between POSBO and Meli is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding POSBO UNSPADRS20YC1 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 POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS20YC1 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 POSBO UNSPADRS/20YC1 i.e., POSBO UNSPADRS/20YC1 and Meli Hotels go up and down completely randomly.

Pair Corralation between POSBO UNSPADRS/20YC1 and Meli Hotels

Assuming the 90 days trading horizon POSBO UNSPADRS20YC1 is expected to generate 1.19 times more return on investment than Meli Hotels. However, POSBO UNSPADRS/20YC1 is 1.19 times more volatile than Meli Hotels International. It trades about 0.11 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.02 per unit of risk. If you would invest  663.00  in POSBO UNSPADRS20YC1 on December 22, 2024 and sell it today you would earn a total of  537.00  from holding POSBO UNSPADRS20YC1 or generate 81.0% return on investment over 90 days.

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

POSBO UNSPADRS20YC1  vs.  Meli Hotels International

POSBO UNSPADRS/20YC1

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in POSBO UNSPADRS20YC1 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, POSBO UNSPADRS/20YC1 reported solid returns over the last few months and may actually be approaching a breakup point.

Meli Hotels International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with POSBO UNSPADRS/20YC1 and Meli Hotels

The main advantage of trading using opposite POSBO UNSPADRS/20YC1 and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS20YC1 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..