Correlation Between CarsalesCom and Meituan

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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

CarsalesComMeituanDiversified AwayCarsalesComMeituanDiversified Away100%
0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CarsalesCom and Meituan is 0.41. 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 under-perform the Meituan. But the stock apears to be less risky and, when comparing its historical volatility, CarsalesCom is 2.07 times less risky than Meituan. The stock trades about -0.08 of its potential returns per unit of risk. The Meituan is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,040  in Meituan on November 22, 2024 and sell it today you would lose (70.00) from holding Meituan or give up 3.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.33%
ValuesDaily Returns

CarsalesCom  vs.  Meituan

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15WN6 9MD
       Timeline  
CarsalesCom 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb21.52222.52323.52424.52525.5
Meituan 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Meituan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Meituan is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb171819202122

CarsalesCom and Meituan Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.8-2.1-1.39-0.69-0.01170.631.31.972.633.3 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15WN6 9MD
       Returns  

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.
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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