Correlation Between Meli Hotels and PPHE HOTEL

Can any of the company-specific risk be diversified away by investing in both Meli Hotels and PPHE HOTEL 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 PPHE HOTEL 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 PPHE HOTEL GROUP, you can compare the effects of market volatilities on Meli Hotels and PPHE HOTEL 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 PPHE HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and PPHE HOTEL.

Diversification Opportunities for Meli Hotels and PPHE HOTEL

0.69

Correlation Coefficient

Meli Hotels  PPHE HOTEL

Poor diversification

The 3 months correlation between Meli and PPHE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and PPHE HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE HOTEL GROUP 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 PPHE HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE HOTEL GROUP has no effect on the direction of Meli Hotels i.e., Meli Hotels and PPHE HOTEL go up and down completely randomly.

Pair Corralation between Meli Hotels and PPHE HOTEL

Assuming the 90 days horizon Meli Hotels is expected to generate 2.05 times less return on investment than PPHE HOTEL. In addition to that, Meli Hotels is 1.03 times more volatile than PPHE HOTEL GROUP. It trades about 0.1 of its total potential returns per unit of risk. PPHE HOTEL GROUP is currently generating about 0.21 per unit of volatility. If you would invest  1,490  in PPHE HOTEL GROUP on October 7, 2024 and sell it today you would earn a total of  220.00  from holding PPHE HOTEL GROUP or generate 14.77% return on investment over 90 days.

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

Meli Hotels International  vs.  PPHE HOTEL GROUP

Meli Hotels International

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Meli Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

PPHE HOTEL GROUP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PPHE HOTEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meli Hotels and PPHE HOTEL

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

The idea behind Meli Hotels International and PPHE HOTEL GROUP 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.