Correlation Between Meli Hotels and CITIC

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Can any of the company-specific risk be diversified away by investing in both Meli Hotels and CITIC 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 CITIC 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 CITIC LTD ADR5, you can compare the effects of market volatilities on Meli Hotels and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meli Hotels and CITIC.

Diversification Opportunities for Meli Hotels and CITIC

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Meli and CITIC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of Meli Hotels i.e., Meli Hotels and CITIC go up and down completely randomly.

Pair Corralation between Meli Hotels and CITIC

Assuming the 90 days horizon Meli Hotels International is expected to generate 1.14 times more return on investment than CITIC. However, Meli Hotels is 1.14 times more volatile than CITIC LTD ADR5. It trades about 0.23 of its potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.25 per unit of risk. If you would invest  608.00  in Meli Hotels International on April 24, 2025 and sell it today you would earn a total of  145.00  from holding Meli Hotels International or generate 23.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Meli Hotels International  vs.  CITIC LTD ADR5

 Performance 
       Timeline  
Meli Hotels International 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Meli Hotels reported solid returns over the last few months and may actually be approaching a breakup point.
CITIC LTD ADR5 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Meli Hotels and CITIC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meli Hotels and CITIC

The main advantage of trading using opposite Meli Hotels and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meli Hotels position performs unexpectedly, CITIC 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 CITIC will offset losses from the drop in CITIC's long position.
The idea behind Meli Hotels International and CITIC LTD ADR5 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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