Correlation Between Meli Hotels and Truist Financial

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Can any of the company-specific risk be diversified away by investing in both Meli Hotels and Truist Financial 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 Meli Hotels and Truist Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meli Hotels International and Truist Financial, you can compare the effects of market volatilities on Meli Hotels and Truist Financial 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 Meli Hotels with a short position of Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and Truist Financial.

Diversification Opportunities for Meli Hotels and Truist Financial

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Meli and Truist is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and Meli Hotels 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 Meli Hotels International are associated (or correlated) with Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Meli Hotels i.e., Meli Hotels and Truist Financial go up and down completely randomly.

Pair Corralation between Meli Hotels and Truist Financial

Assuming the 90 days horizon Meli Hotels International is expected to generate 1.23 times more return on investment than Truist Financial. However, Meli Hotels is 1.23 times more volatile than Truist Financial. It trades about 0.12 of its potential returns per unit of risk. Truist Financial is currently generating about 0.02 per unit of risk. If you would invest  718.00  in Meli Hotels International on September 16, 2024 and sell it today you would earn a total of  34.00  from holding Meli Hotels International or generate 4.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Meli Hotels International  vs.  Truist Financial

 Performance 
       Timeline  
Meli Hotels International 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meli Hotels reported solid returns over the last few months and may actually be approaching a breakup point.
Truist Financial 

Risk-Adjusted Performance

10 of 100

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

Meli Hotels and Truist Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meli Hotels and Truist Financial

The main advantage of trading using opposite Meli Hotels and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meli Hotels position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial's long position.
The idea behind Meli Hotels International and Truist Financial 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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