Correlation Between Meli Hotels and Groupama Entreprises

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

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

Diversification Opportunities for Meli Hotels and Groupama Entreprises

0.81

Correlation Coefficient

Meli Hotels  Groupama Entreprises

Very poor diversification

The 3 months correlation between Meli and Groupama is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Groupama Entreprises N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupama Entreprises and Meli Hotels 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 Meli Hotels International are associated (or correlated) with Groupama Entreprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupama Entreprises has no effect on the direction of Meli Hotels i.e., Meli Hotels and Groupama Entreprises go up and down completely randomly.

Pair Corralation between Meli Hotels and Groupama Entreprises

Assuming the 90 days horizon Meli Hotels International is expected to generate 127.95 times more return on investment than Groupama Entreprises. However, Meli Hotels is 127.95 times more volatile than Groupama Entreprises N. It trades about 0.13 of its potential returns per unit of risk. Groupama Entreprises N is currently generating about 0.94 per unit of risk. If you would invest  649.00  in Meli Hotels International on October 5, 2024 and sell it today you would earn a total of  80.00  from holding Meli Hotels International or generate 12.33% return on investment over 90 days.

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

Meli Hotels International  vs.  Groupama Entreprises N

Meli Hotels International

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Meli Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Groupama Entreprises

Risk-Adjusted Performance

0 of 100

Market Crasher

Over the last 90 days Groupama Entreprises N has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Groupama Entreprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Meli Hotels and Groupama Entreprises

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

The idea behind Meli Hotels International and Groupama Entreprises N 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.