Correlation Between Baozun and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Baozun and MercadoLibre 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 Baozun and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baozun Inc and MercadoLibre, you can compare the effects of market volatilities on Baozun and MercadoLibre 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 Baozun with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baozun and MercadoLibre.
Diversification Opportunities for Baozun and MercadoLibre
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Baozun and MercadoLibre is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Baozun Inc and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Baozun 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 Baozun Inc are associated (or correlated) with MercadoLibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MercadoLibre has no effect on the direction of Baozun i.e., Baozun and MercadoLibre go up and down completely randomly.
Pair Corralation between Baozun and MercadoLibre
Given the investment horizon of 90 days Baozun Inc is expected to under-perform the MercadoLibre. In addition to that, Baozun is 2.0 times more volatile than MercadoLibre. It trades about -0.05 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.26 per unit of volatility. If you would invest 166,600 in MercadoLibre on October 20, 2024 and sell it today you would earn a total of 17,000 from holding MercadoLibre or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baozun Inc vs. MercadoLibre
Performance |
| Timeline |
| Baozun Inc |
| MercadoLibre |
Baozun and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baozun and MercadoLibre
The main advantage of trading using opposite Baozun and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baozun position performs unexpectedly, MercadoLibre 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 MercadoLibre will offset losses from the drop in MercadoLibre's long position.| Baozun vs. PDD Holdings | Baozun vs. JD Inc Adr | Baozun vs. Global E Online | Baozun vs. Vipshop Holdings Limited |
| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
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 Stocks Directory module to find actively traded stocks across global markets.
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