Correlation Between Sweetgreen and Meli Hotels

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

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

Diversification Opportunities for Sweetgreen and Meli Hotels

0.36

Correlation Coefficient

Sweetgreen  Meli Hotels

Weak diversification

The 3 months correlation between Sweetgreen and Meli is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sweetgreen 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 Sweetgreen 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 Sweetgreen 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 Sweetgreen i.e., Sweetgreen and Meli Hotels go up and down completely randomly.

Pair Corralation between Sweetgreen and Meli Hotels

Allowing for the 90-day total investment horizon Sweetgreen is expected to generate 2.36 times more return on investment than Meli Hotels. However, Sweetgreen is 2.36 times more volatile than Meli Hotels International. It trades about 0.12 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.07 per unit of risk. If you would invest  990.00  in Sweetgreen on September 15, 2024 and sell it today you would earn a total of  2,784  from holding Sweetgreen or generate 281.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.28%
Values	Daily Returns

Sweetgreen  vs.  Meli Hotels International

Sweetgreen

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sweetgreen are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Sweetgreen reported solid returns over the last few months and may actually be approaching a breakup point.

Meli Hotels International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sweetgreen and Meli Hotels

The main advantage of trading using opposite Sweetgreen and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sweetgreen 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 Sweetgreen 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.