Correlation Between Triton International and Meli Hotels

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

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

Diversification Opportunities for Triton International and Meli Hotels

-0.05

Correlation Coefficient

Triton International  Meli Hotels

Good diversification

The 3 months correlation between Triton and Meli is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Triton International Limited 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 Triton International 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 Triton International Limited 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 Triton International i.e., Triton International and Meli Hotels go up and down completely randomly.

Pair Corralation between Triton International and Meli Hotels

Assuming the 90 days trading horizon Triton International Limited is expected to under-perform the Meli Hotels. But the preferred stock apears to be less risky and, when comparing its historical volatility, Triton International Limited is 2.58 times less risky than Meli Hotels. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Meli Hotels International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  687.00  in Meli Hotels International on September 24, 2024 and sell it today you would earn a total of  92.00  from holding Meli Hotels International or generate 13.39% return on investment over 90 days.

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

Triton International Limited  vs.  Meli Hotels International

Triton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triton International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Triton International is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Meli Hotels International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 12 (%) 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 Triton International and Meli Hotels

The main advantage of trading using opposite Triton International and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triton International 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 Triton International Limited 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.