Correlation Between Meli Hotels and Pfizer

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

Diversification Opportunities for Meli Hotels and Pfizer

0.13

Correlation Coefficient

Meli Hotels  Pfizer

Average diversification

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

Pair Corralation between Meli Hotels and Pfizer

Assuming the 90 days horizon Meli Hotels International is expected to under-perform the Pfizer. In addition to that, Meli Hotels is 1.25 times more volatile than Pfizer Inc. It trades about -0.09 of its total potential returns per unit of risk. Pfizer Inc is currently generating about -0.04 per unit of volatility. If you would invest  2,492  in Pfizer Inc on December 21, 2024 and sell it today you would lose (89.00) from holding Pfizer Inc or give up 3.57% of portfolio value over 90 days.

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

Meli Hotels International  vs.  Pfizer Inc

Meli Hotels International

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pfizer Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Meli Hotels and Pfizer

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

The idea behind Meli Hotels International and Pfizer Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.