Correlation Between Huaneng Power and Meli Hotels

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

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

Diversification Opportunities for Huaneng Power and Meli Hotels

0.14

Correlation Coefficient

Huaneng Power  Meli Hotels

Average diversification

The 3 months correlation between Huaneng and Meli is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Power International 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 Huaneng Power 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 Huaneng Power International 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 Huaneng Power i.e., Huaneng Power and Meli Hotels go up and down completely randomly.

Pair Corralation between Huaneng Power and Meli Hotels

Assuming the 90 days trading horizon Huaneng Power International is expected to generate 1.72 times more return on investment than Meli Hotels. However, Huaneng Power is 1.72 times more volatile than Meli Hotels International. It trades about 0.05 of its potential returns per unit of risk. Meli Hotels International is currently generating about -0.09 per unit of risk. If you would invest  50.00  in Huaneng Power International on December 21, 2024 and sell it today you would earn a total of  3.00  from holding Huaneng Power International or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Huaneng Power International  vs.  Meli Hotels International

Huaneng Power Intern

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huaneng Power International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Huaneng Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Huaneng Power and Meli Hotels

The main advantage of trading using opposite Huaneng Power and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaneng Power 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 Huaneng Power International 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.