Correlation Between Weibo Corp and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both Weibo Corp and Meli Hotels 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 Weibo Corp and Meli Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weibo Corp and Meli Hotels International, you can compare the effects of market volatilities on Weibo Corp and Meli Hotels 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 Weibo Corp with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weibo Corp and Meli Hotels.
Diversification Opportunities for Weibo Corp and Meli Hotels
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Weibo and Meli is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International and Weibo Corp 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 Weibo Corp are associated (or correlated) with Meli Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Weibo Corp i.e., Weibo Corp and Meli Hotels go up and down completely randomly.
Pair Corralation between Weibo Corp and Meli Hotels
Allowing for the 90-day total investment horizon Weibo Corp is expected to under-perform the Meli Hotels. In addition to that, Weibo Corp is 1.61 times more volatile than Meli Hotels International. It trades about -0.01 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.03 per unit of volatility. If you would invest 645.00 in Meli Hotels International on October 5, 2024 and sell it today you would earn a total of 134.00 from holding Meli Hotels International or generate 20.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 97.58% |
Values | Daily Returns |
Weibo Corp vs. Meli Hotels International
Performance |
Timeline |
Weibo Corp |
Meli Hotels International |
Weibo Corp and Meli Hotels Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Weibo Corp and Meli Hotels
The main advantage of trading using opposite Weibo Corp and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp position performs unexpectedly, Meli Hotels 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 Meli Hotels will offset losses from the drop in Meli Hotels' long position.Weibo Corp vs. YY Inc Class | Weibo Corp vs. DouYu International Holdings | Weibo Corp vs. Tencent Music Entertainment | Weibo Corp vs. Autohome |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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