Correlation Between Mitsui Fudosan and Meli Hotels

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

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

Diversification Opportunities for Mitsui Fudosan and Meli Hotels

-0.73

Correlation Coefficient

Mitsui Fudosan  Meli Hotels

Pay attention - limited upside

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

Pair Corralation between Mitsui Fudosan and Meli Hotels

Assuming the 90 days horizon Mitsui Fudosan Co is expected to generate 1.12 times more return on investment than Meli Hotels. However, Mitsui Fudosan is 1.12 times more volatile than Meli Hotels International. It trades about 0.04 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.04 per unit of risk. If you would invest  557.00  in Mitsui Fudosan Co on September 16, 2024 and sell it today you would earn a total of  208.00  from holding Mitsui Fudosan Co or generate 37.34% return on investment over 90 days.

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

Mitsui Fudosan Co  vs.  Meli Hotels International

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Meli Hotels International

Risk-Adjusted Performance

11 of 100

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.

Pair Trading with Mitsui Fudosan and Meli Hotels

The main advantage of trading using opposite Mitsui Fudosan and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Fudosan 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 Mitsui Fudosan Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.