Correlation Between Meituan and Apollo Investment

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

By analyzing existing cross correlation between Meituan and Apollo Investment Corp, you can compare the effects of market volatilities on Meituan and Apollo Investment 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 Meituan with a short position of Apollo Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan and Apollo Investment.

Diversification Opportunities for Meituan and Apollo Investment

0.01

Correlation Coefficient

Meituan  Apollo Investment

Significant diversification

The 3 months correlation between Meituan and Apollo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Meituan and Apollo Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Investment Corp and Meituan 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 Meituan are associated (or correlated) with Apollo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Investment Corp has no effect on the direction of Meituan i.e., Meituan and Apollo Investment go up and down completely randomly.

Pair Corralation between Meituan and Apollo Investment

Assuming the 90 days horizon Meituan is expected to generate 2.61 times more return on investment than Apollo Investment. However, Meituan is 2.61 times more volatile than Apollo Investment Corp. It trades about 0.01 of its potential returns per unit of risk. Apollo Investment Corp is currently generating about -0.03 per unit of risk. If you would invest  1,871  in Meituan on December 30, 2024 and sell it today you would lose (9.00) from holding Meituan or give up 0.48% of portfolio value over 90 days.

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

Meituan  vs.  Apollo Investment Corp

Meituan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Meituan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Apollo Investment Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Meituan and Apollo Investment

The main advantage of trading using opposite Meituan and Apollo Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan position performs unexpectedly, Apollo Investment 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 Apollo Investment will offset losses from the drop in Apollo Investment's long position.

The idea behind Meituan and Apollo Investment Corp 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.