Correlation Between NETGEAR and Meli Hotels

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

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

Diversification Opportunities for NETGEAR and Meli Hotels

0.59

Correlation Coefficient

NETGEAR  Meli Hotels

Very weak diversification

The 3 months correlation between NETGEAR and Meli is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR 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 NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Meli Hotels go up and down completely randomly.

Pair Corralation between NETGEAR and Meli Hotels

Given the investment horizon of 90 days NETGEAR is expected to generate 3.29 times more return on investment than Meli Hotels. However, NETGEAR is 3.29 times more volatile than Meli Hotels International. It trades about 0.14 of its potential returns per unit of risk. Meli Hotels International is currently generating about 0.14 per unit of risk. If you would invest  2,161  in NETGEAR on April 20, 2025 and sell it today you would earn a total of  618.00  from holding NETGEAR or generate 28.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.48%
Values	Daily Returns

NETGEAR  vs.  Meli Hotels International

NETGEAR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Meli Hotels International

Risk-Adjusted Performance

OK

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with NETGEAR and Meli Hotels

The main advantage of trading using opposite NETGEAR and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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 Global Correlations module to find global opportunities by holding instruments from different markets.