Correlation Between Intouch Holdings and Meituan

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

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

Diversification Opportunities for Intouch Holdings and Meituan

0.79

Correlation Coefficient

Intouch Holdings  Meituan

Poor diversification

The 3 months correlation between Intouch and Meituan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Intouch Holdings Public and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and Intouch Holdings 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 Intouch Holdings Public are associated (or correlated) with Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of Intouch Holdings i.e., Intouch Holdings and Meituan go up and down completely randomly.

Pair Corralation between Intouch Holdings and Meituan

Assuming the 90 days trading horizon Intouch Holdings Public is expected to generate 0.48 times more return on investment than Meituan. However, Intouch Holdings Public is 2.06 times less risky than Meituan. It trades about -0.16 of its potential returns per unit of risk. Meituan is currently generating about -0.17 per unit of risk. If you would invest  270.00  in Intouch Holdings Public on September 3, 2024 and sell it today you would lose (16.00) from holding Intouch Holdings Public or give up 5.93% of portfolio value over 90 days.

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

Intouch Holdings Public  vs.  Meituan

Intouch Holdings Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intouch Holdings Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Intouch Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Meituan

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meituan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intouch Holdings and Meituan

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

The idea behind Intouch Holdings Public and Meituan 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.