Correlation Between Solo Brands and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Solo Brands 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 Solo Brands and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solo Brands and MercadoLibre, you can compare the effects of market volatilities on Solo Brands 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 Solo Brands with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solo Brands and MercadoLibre.
Diversification Opportunities for Solo Brands and MercadoLibre
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Solo and MercadoLibre is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Solo Brands and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Solo Brands 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 Solo Brands 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 Solo Brands i.e., Solo Brands and MercadoLibre go up and down completely randomly.
Pair Corralation between Solo Brands and MercadoLibre
Considering the 90-day investment horizon Solo Brands is expected to under-perform the MercadoLibre. In addition to that, Solo Brands is 1.2 times more volatile than MercadoLibre. It trades about -0.04 of its total potential returns per unit of risk. MercadoLibre is currently generating about -0.02 per unit of volatility. If you would invest 203,870 in MercadoLibre on August 24, 2024 and sell it today you would lose (7,055) from holding MercadoLibre or give up 3.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solo Brands vs. MercadoLibre
Performance |
| Timeline |
| Solo Brands |
| MercadoLibre |
Solo Brands and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solo Brands and MercadoLibre
The main advantage of trading using opposite Solo Brands and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solo Brands 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.| Solo Brands vs. Qurate Retail Series | Solo Brands vs. Hour Loop | Solo Brands vs. 1StdibsCom | Solo Brands vs. Baozun Inc |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |