Correlation Between FIREWEED METALS and Meituan

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

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

Diversification Opportunities for FIREWEED METALS and Meituan

0.13

Correlation Coefficient

FIREWEED METALS  Meituan

Average diversification

The 3 months correlation between FIREWEED and Meituan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and FIREWEED METALS 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 FIREWEED METALS P are associated (or correlated) with Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and Meituan go up and down completely randomly.

Pair Corralation between FIREWEED METALS and Meituan

Assuming the 90 days horizon FIREWEED METALS is expected to generate 2.7 times less return on investment than Meituan. But when comparing it to its historical volatility, FIREWEED METALS P is 1.12 times less risky than Meituan. It trades about 0.04 of its potential returns per unit of risk. Meituan is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  855.00  in Meituan on October 9, 2024 and sell it today you would earn a total of  1,002  from holding Meituan or generate 117.19% return on investment over 90 days.

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

FIREWEED METALS P  vs.  Meituan

FIREWEED METALS P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Meituan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meituan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FIREWEED METALS and Meituan

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

The idea behind FIREWEED METALS P and Meituan 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.