Correlation Between Coupang LLC and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Coupang LLC 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 Coupang LLC and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coupang LLC and MercadoLibre, you can compare the effects of market volatilities on Coupang LLC 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 Coupang LLC with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coupang LLC and MercadoLibre.
Diversification Opportunities for Coupang LLC and MercadoLibre
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coupang and MercadoLibre is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Coupang LLC and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Coupang LLC 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 Coupang LLC 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 Coupang LLC i.e., Coupang LLC and MercadoLibre go up and down completely randomly.
Pair Corralation between Coupang LLC and MercadoLibre
Given the investment horizon of 90 days Coupang LLC is expected to generate 1.0 times less return on investment than MercadoLibre. In addition to that, Coupang LLC is 1.1 times more volatile than MercadoLibre. It trades about 0.43 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.47 per unit of volatility. If you would invest 183,600 in MercadoLibre on November 18, 2024 and sell it today you would earn a total of 27,399 from holding MercadoLibre or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coupang LLC vs. MercadoLibre
Performance |
| Timeline |
| Coupang LLC |
| MercadoLibre |
Coupang LLC and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coupang LLC and MercadoLibre
The main advantage of trading using opposite Coupang LLC and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coupang LLC 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.| Coupang LLC vs. MercadoLibre | Coupang LLC vs. PDD Holdings | Coupang LLC vs. JD Inc Adr | Coupang LLC vs. Alibaba Group Holding |
| 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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