Correlation Between National Retail and Meli Hotels

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

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

Diversification Opportunities for National Retail and Meli Hotels

-0.64

Correlation Coefficient

National Retail  Meli Hotels

Excellent diversification

The 3 months correlation between National and Meli is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties 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 National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Meli Hotels go up and down completely randomly.

Pair Corralation between National Retail and Meli Hotels

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the Meli Hotels. In addition to that, National Retail is 1.12 times more volatile than Meli Hotels International. It trades about -0.02 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

National Retail Properties  vs.  Meli Hotels International

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 fragile basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Retail and Meli Hotels

The main advantage of trading using opposite National Retail and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.