Correlation Between Meli Hotels and First Quantum

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

Diversification Opportunities for Meli Hotels and First Quantum

0.28

Correlation Coefficient

Meli Hotels  First Quantum

Modest diversification

The 3 months correlation between Meli and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Meli Hotels i.e., Meli Hotels and First Quantum go up and down completely randomly.

Pair Corralation between Meli Hotels and First Quantum

Assuming the 90 days horizon Meli Hotels International is expected to generate 0.43 times more return on investment than First Quantum. However, Meli Hotels International is 2.31 times less risky than First Quantum. It trades about 0.06 of its potential returns per unit of risk. First Quantum Minerals is currently generating about 0.0 per unit of risk. If you would invest  463.00  in Meli Hotels International on September 24, 2024 and sell it today you would earn a total of  263.00  from holding Meli Hotels International or generate 56.8% return on investment over 90 days.

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

Meli Hotels International  vs.  First Quantum Minerals

Meli Hotels International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Quantum Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Quantum Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Quantum 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 First Quantum

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

The idea behind Meli Hotels International and First Quantum Minerals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.