Correlation Between Meli Hotels and TDK

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

Diversification Opportunities for Meli Hotels and TDK

0.68

Correlation Coefficient

Meli Hotels  TDK

Poor diversification

The 3 months correlation between Meli and TDK is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and TDK Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDK Corporation 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 TDK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDK Corporation has no effect on the direction of Meli Hotels i.e., Meli Hotels and TDK go up and down completely randomly.

Pair Corralation between Meli Hotels and TDK

Assuming the 90 days horizon Meli Hotels International is expected to generate 0.83 times more return on investment than TDK. However, Meli Hotels International is 1.21 times less risky than TDK. It trades about 0.06 of its potential returns per unit of risk. TDK Corporation is currently generating about 0.04 per unit of risk. If you would invest  663.00  in Meli Hotels International on October 25, 2024 and sell it today you would earn a total of  31.00  from holding Meli Hotels International or generate 4.68% 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.  TDK Corp.

Meli Hotels International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

TDK Corporation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TDK Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TDK 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 TDK

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

The idea behind Meli Hotels International and TDK Corporation 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.