Correlation Between Avis Budget and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both Avis Budget 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 Avis Budget and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avis Budget Group and Meli Hotels International, you can compare the effects of market volatilities on Avis Budget 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 Avis Budget with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Meli Hotels.
Diversification Opportunities for Avis Budget and Meli Hotels
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Avis and Meli is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group 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 Avis Budget 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 Avis Budget Group 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 Avis Budget i.e., Avis Budget and Meli Hotels go up and down completely randomly.
Pair Corralation between Avis Budget and Meli Hotels
Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the Meli Hotels. In addition to that, Avis Budget is 1.01 times more volatile than Meli Hotels International. It trades about -0.62 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.22 per unit of volatility. If you would invest 711.00 in Meli Hotels International on September 24, 2024 and sell it today you would earn a total of 68.00 from holding Meli Hotels International or generate 9.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.24% |
Values | Daily Returns |
Avis Budget Group vs. Meli Hotels International
Performance |
Timeline |
Avis Budget Group |
Meli Hotels International |
Avis Budget and Meli Hotels Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Avis Budget and Meli Hotels
The main advantage of trading using opposite Avis Budget and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget 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.Avis Budget vs. Hertz Global Hldgs | Avis Budget vs. Ryder System | Avis Budget vs. HE Equipment Services | Avis Budget vs. United Rentals |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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