Correlation Between CarsalesCom and Meituan

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

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

Diversification Opportunities for CarsalesCom and Meituan

0.07

Correlation Coefficient

CarsalesCom  Meituan

Significant diversification

The 3 months correlation between CarsalesCom and Meituan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and CarsalesCom 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 CarsalesCom 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 CarsalesCom i.e., CarsalesCom and Meituan go up and down completely randomly.

Pair Corralation between CarsalesCom and Meituan

Assuming the 90 days horizon CarsalesCom is expected to generate 0.45 times more return on investment than Meituan. However, CarsalesCom is 2.21 times less risky than Meituan. It trades about 0.08 of its potential returns per unit of risk. Meituan is currently generating about 0.02 per unit of risk. If you would invest  1,319  in CarsalesCom on November 1, 2024 and sell it today you would earn a total of  1,081  from holding CarsalesCom or generate 81.96% return on investment over 90 days.

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

CarsalesCom  vs.  Meituan

CarsalesCom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Meituan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meituan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CarsalesCom and Meituan

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

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.