Correlation Between Meituan ADR and Latham

Can any of the company-specific risk be diversified away by investing in both Meituan ADR and Latham 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 Meituan ADR and Latham into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meituan ADR and Latham Group, you can compare the effects of market volatilities on Meituan ADR and Latham 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 Meituan ADR with a short position of Latham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan ADR and Latham.

Diversification Opportunities for Meituan ADR and Latham

-0.23

Correlation Coefficient

Meituan ADR  Latham

Very good diversification

The 3 months correlation between Meituan and Latham is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Meituan ADR and Latham Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latham Group and Meituan ADR 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 Meituan ADR are associated (or correlated) with Latham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latham Group has no effect on the direction of Meituan ADR i.e., Meituan ADR and Latham go up and down completely randomly.

Pair Corralation between Meituan ADR and Latham

Assuming the 90 days horizon Meituan ADR is expected to under-perform the Latham. But the pink sheet apears to be less risky and, when comparing its historical volatility, Meituan ADR is 1.2 times less risky than Latham. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Latham Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  662.00  in Latham Group on October 26, 2024 and sell it today you would earn a total of  43.00  from holding Latham Group or generate 6.5% return on investment over 90 days.

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

Meituan ADR  vs.  Latham Group

Meituan ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meituan ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Latham Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Latham Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Latham may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Meituan ADR and Latham

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

The idea behind Meituan ADR and Latham 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 Global Correlations module to find global opportunities by holding instruments from different markets.