Correlation Between Meli Hotels and Cadence Design

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

Diversification Opportunities for Meli Hotels and Cadence Design

0.0

Correlation Coefficient

Meli Hotels  Cadence Design

Pay attention - limited upside

The 3 months correlation between Meli and Cadence is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Meli Hotels i.e., Meli Hotels and Cadence Design go up and down completely randomly.

Pair Corralation between Meli Hotels and Cadence Design

If you would invest  0.00  in Cadence Design Systems on October 4, 2024 and sell it today you would earn a total of  0.00  from holding Cadence Design Systems or generate 0.0% return on investment over 90 days.

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

Meli Hotels International  vs.  Cadence Design Systems

Meli Hotels International

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, Meli Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cadence Design Systems

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Meli Hotels and Cadence Design

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

The idea behind Meli Hotels International and Cadence Design Systems 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.

Check out your portfolio center.

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.