Correlation Between WEBTOON Entertainment and Meli Hotels

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

By analyzing existing cross correlation between WEBTOON Entertainment Common and Meli Hotels International, you can compare the effects of market volatilities on WEBTOON Entertainment 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 WEBTOON Entertainment with a short position of Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEBTOON Entertainment and Meli Hotels.

Diversification Opportunities for WEBTOON Entertainment and Meli Hotels

0.73

Correlation Coefficient

WEBTOON Entertainment  Meli Hotels

Poor diversification

The 3 months correlation between WEBTOON and Meli is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding WEBTOON Entertainment Common 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 WEBTOON Entertainment 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 WEBTOON Entertainment Common 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 WEBTOON Entertainment i.e., WEBTOON Entertainment and Meli Hotels go up and down completely randomly.

Pair Corralation between WEBTOON Entertainment and Meli Hotels

Given the investment horizon of 90 days WEBTOON Entertainment Common is expected to generate 2.64 times more return on investment than Meli Hotels. However, WEBTOON Entertainment is 2.64 times more volatile than Meli Hotels International. It trades about 0.13 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.13 per unit of risk. If you would invest  1,084  in WEBTOON Entertainment Common on October 6, 2024 and sell it today you would earn a total of  275.00  from holding WEBTOON Entertainment Common or generate 25.37% return on investment over 90 days.

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

WEBTOON Entertainment Common  vs.  Meli Hotels International

WEBTOON Entertainment

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WEBTOON Entertainment Common are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, WEBTOON Entertainment displayed solid returns over the last few months and may actually be approaching a breakup point.

Meli Hotels International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WEBTOON Entertainment and Meli Hotels

The main advantage of trading using opposite WEBTOON Entertainment and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEBTOON Entertainment 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.

The idea behind WEBTOON Entertainment Common and Meli Hotels International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.