Correlation Between COMINTL BANK and MercadoLibre

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Can any of the company-specific risk be diversified away by investing in both COMINTL BANK 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 COMINTL BANK and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COMINTL BANK ADR1 and MercadoLibre, you can compare the effects of market volatilities on COMINTL BANK 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 COMINTL BANK with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMINTL BANK and MercadoLibre.

Diversification Opportunities for COMINTL BANK and MercadoLibre

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between COMINTL and MercadoLibre is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding COMINTL BANK ADR1 and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and COMINTL BANK 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 COMINTL BANK ADR1 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 COMINTL BANK i.e., COMINTL BANK and MercadoLibre go up and down completely randomly.

Pair Corralation between COMINTL BANK and MercadoLibre

Assuming the 90 days trading horizon COMINTL BANK ADR1 is expected to generate 0.51 times more return on investment than MercadoLibre. However, COMINTL BANK ADR1 is 1.94 times less risky than MercadoLibre. It trades about -0.1 of its potential returns per unit of risk. MercadoLibre is currently generating about -0.1 per unit of risk. If you would invest  130.00  in COMINTL BANK ADR1 on September 13, 2024 and sell it today you would lose (4.00) from holding COMINTL BANK ADR1 or give up 3.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

COMINTL BANK ADR1  vs.  MercadoLibre

 Performance 
       Timeline  
COMINTL BANK ADR1 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COMINTL BANK ADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, COMINTL BANK is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
MercadoLibre 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MercadoLibre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, MercadoLibre is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

COMINTL BANK and MercadoLibre Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with COMINTL BANK and MercadoLibre

The main advantage of trading using opposite COMINTL BANK and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMINTL BANK 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.
The idea behind COMINTL BANK ADR1 and MercadoLibre 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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